Crypto.com’s North American Derivatives Exchange (NADEX) and Novig have filed lawsuits in federal court against the state of Missouri, challenging the state’s gambling laws and asserting federal jurisdiction from the Commodity Futures Trading Commission (CFTC) over their prediction market contracts. These legal actions follow cease-and-desist orders issued by Missouri’s Secretary of State, Catherine Hanaway, to several prediction market platforms in September.
NADEX, a CFTC-registered exchange that operates Crypto.com’s prediction market platform, filed its lawsuit in the U.S. Federal Court for the Western District of Missouri. The lawsuit claims that the Commodity Exchange Act grants the CFTC exclusive jurisdiction over its “event contracts,” thereby preempting state gambling laws. NADEX is seeking a declaratory judgment and a permanent injunction.
Novig, through its operator Ludlow Exchange LLC, filed a separate lawsuit in the U.S. Federal Court for the Eastern District of Missouri, also seeking a preliminary and permanent injunction. Both lawsuits argue that federal law supersedes Missouri’s authority to regulate these types of contracts as gambling.
In September, Missouri’s Secretary of State Catherine Hanaway issued cease-and-desist letters to six prediction market platforms, including Crypto.com, Novig, Kalshi, Polymarket, Robinhood, and Underdog. The letters demanded that these platforms cease offering sports event contracts to Missouri users or obtain a state license and pay a 10% gambling tax. According to Hanaway, Crypto.com’s platform allowed users aged 18 and over, while Missouri’s legal sports betting age is 21. The cease-and-desist letters provided operators 30 days to comply.
The lawsuit filings noted that Hanaway sent her letter to Foris DAX, Inc., not NADEX itself. Additionally, Missouri’s constitution permits only two direct mobile sports betting licenses, both of which have been issued, rendering it infeasible for these platforms to obtain a state license.
As of Sunday, Kalshi, Polymarket, Robinhood, and Underdog had not filed lawsuits in Missouri federal courts, despite receiving similar cease-and-desist letters in September.
Federal appellate courts hold differing opinions on whether federal law preempts state gambling laws for sports event contracts. The Sixth and Ninth Circuits have ruled against Kalshi, while the Third Circuit ruled in favor of Kalshi. The Eighth Circuit Court of Appeals, which directly oversees Missouri, is expected to play a critical role in this ongoing jurisdictional dispute.
The legal outcome in Missouri could significantly impact the future of prediction markets nationwide, as it represents a core battle for the industry’s ability to operate legally across different states. The CFTC’s registration of exchanges like NADEX is based on the premise that these are commodity derivatives, not gambling. However, state regulators are increasingly viewing event contracts as a form of sports betting, leading to the current regulatory divergence.
Why This Matters
The materials describe a narrow update: Crypto. Whether federal law (Commodity Exchange Act) grants exclusive CFTC jurisdiction over prediction market ‘event contracts’ and preempts state gambling laws.
Broader Context
Source materials place the factual news in this context: Crypto.com and Novig are leading the charge in federal court in Missouri, arguing for CFTC jurisdiction over state gambling laws.
