Missouri AG Catherine Hanaway targets six prediction market operators

Missouri Attorney General Catherine Hanaway sent cease-and-desist letters to six prediction market operators — Crypto.com, Kalshi, Nova, Polymarket, Robinhood, and Underdog — ordering them to stop offering sports event contracts to Missouri customers unless they obtain state gaming licenses.

The legal architecture underneath Hanaway's order is worth reading carefully. Missouri's sports wagering framework was approved by voters in 2024 and came online in December 2025. It imposes a 10 percent tax on adjusted gross revenue, requires Gaming Commission licensing, mandates age verification at 21, and carries responsible gambling obligations. Hanaway's position is that prediction market operators offering sports contracts are doing the same thing licensed sportsbooks do — and collecting on it without carrying any of the same obligations.

That framing is doing significant legal work. The operators named in these letters have consistently argued that their contracts are swaps regulated exclusively by the CFTC under the Commodity Exchange Act, which would trigger federal preemption and take the state out of the picture entirely. Hanaway's response, implicit in the letters, is that recent federal appellate decisions have narrowed that argument considerably — specifically, courts finding that sports event contracts do not qualify as swaps under the CEA. If the swap classification doesn't hold, the preemption argument doesn't hold. And if preemption doesn't hold, Missouri's licensing regime applies.

I think the consensus reading of this situation underestimates how durable the state enforcement position actually is. The operators have been winning preemption arguments in contexts where the contracts looked more clearly like financial instruments. Sports event contracts are a harder case. The underlying event — a game, a score, a player's performance — has no economic exposure to hedge. A farmer buying a corn futures contract is managing real price risk. Someone pricing whether the Chiefs cover the spread is doing something the CEA was not written to protect. Courts have noticed this. Hanaway has noticed that courts noticed.

The operators have a choice that isn't really a choice: litigate preemption in Missouri courts while continuing to face enforcement risk, or negotiate licensing terms with the Gaming Commission. Hanaway said she hopes they will do the latter. In my experience, when an enforcement posture has a settlement door built into the press release, the agency has already done the math on litigation and decided it costs them less to offer terms than to try the case.

Prediction markets on a Missouri resolution are active, and I think they are mispriced toward the operators. The legal standard that controls here is whether sports event contracts constitute "sports wagering" under Missouri's voter-approved framework — and the plain language of that framework, combined with the appellate erosion of the swap classification, gives the state considerably more ground than the market appears to be pricing.