Missouri AG orders prediction market platforms to cease operations

Missouri AG Catherine Hanaway names Kalshi and Polymarket in cease-and-desist action

Catherine Hanaway signed her name to something this week that the prediction market industry has been watching for in state capitals across the country: a cease-and-desist action naming Kalshi and Polymarket, prepared by Missouri's attorney general office and aimed at platforms operating in the state without what Missouri considers a gambling licence.

The action matters less for what it will immediately do to those platforms and more for what it confirms about the strategic landscape. Missouri is not a small market acting alone. It is the latest in a sequence — Lithuania ordering Polymarket blocked, European regulators reaching the same conclusion through different legal frameworks, tribal nations winning at the Ninth Circuit on IGRA grounds — that now forms a coherent pattern rather than a collection of isolated disputes. Each decision gives the next regulator something to point to. Hanaway's office did not have to construct an argument from scratch; the argument has been assembled for them, jurisdiction by jurisdiction, over the past eighteen months.

The industry's standard response to state-level action has been to invoke federal preemption: Kalshi is a CFTC-regulated exchange, its contracts are designated contract markets, and the Commodity Exchange Act displaces state gambling law. That argument has not been fully tested in Missouri. It was also the argument that ran into significant difficulty at the Ninth Circuit, where the tribal IGRA claim created a carve-out that the preemption defence could not reach. A cease-and-desist from a state attorney general is not a federal court ruling, but it forces the platforms to either litigate the preemption question in Missouri or withdraw, and withdrawal in one state tends to complicate the "we are a federally regulated exchange operating lawfully everywhere" position.

What I keep coming back to is the CFTC's absence. Michael Selig's office has not issued guidance that would give state attorneys general a clear reason to stand down. In a market where federal regulatory clarity is the platforms' best shield, the silence reads differently now than it did a year ago. Hanaway would have less ground to stand on if the CFTC had published a definitive preemption rule. It has not. The platforms are fighting these battles with the tools they have rather than the tools they need, and the tools they have are working less consistently than they once did.

I have been long on the prediction market industry's long-term US expansion for years. I remain so. But the path I expected — federal clarity, state acquiescence, rapid volume growth — has been replaced by something slower and more expensive. The platforms will likely survive Missouri's action in the same way they have survived others: through litigation, delay, and selective withdrawal from specific product lines in specific states. What they will not recover quickly is the regulatory narrative that this was a settled question. Hanaway's filing, combined with the Ninth Circuit's IGRA holding and the European enforcement wave, has made that narrative untenable.