ST. LOUIS—The Missouri attorney general’s office says it’s in “ongoing discussions” with Kalshi, the prediction market firm that was the first of six companies in the space to respond to a formal cease and desist letter sent out last month. The state is arguing that Kalshi, Robinhood, Polymarket, Novig, Underdog and Crypto.com are engaged in unlicensed sports wagering.
“Any company that wants to offer sports wagering in Missouri must be licensed by the Missouri Gaming Commission, pay the required taxes and fees, and ensure no one under 21 can place a bet,” Attorney General Catherine Hanaway said last month in announcing the move.
Kalshi, like its counterparts, say that prediction markets fall exclusively under federal jurisdiction and are not governed by a patchwork of state gambling laws. The Commodity Futures Trading Commission, the federal agency responsible for regulating financial markets, agrees and has defended prediction markets in court.
“Prediction markets are federally regulated as swaps governed by the Commodity Exchange Act and Dodd-Frank. The CFTC, not state gaming commissions, is the appropriate regulator,” said a spokesperson for the Coalition of Prediction Markets, an industry trade group. “Federal commodities law exists precisely for markets that operate across state lines and require uniform national oversight.”
It’s a continuation of system that has functioned for hundreds of years, Nicole Kagan, Kalshi’s head of research, told Spectrum News in an interview in St. Louis.
“The same way that traditional agricultural exchanges where farmers would hedge out their wheat crops or their corn yields would use, we offer the same thing, the same fundamental kind of product. It allows you to offset some risk by hedging that out using our platform. And that’s true of all events,” she said.
Federal courts across the country have produced mixed decisions on the issue as it relates to sports, with some ruling that state gaming laws do apply, while others have backed exclusive federal jurisdiction.
Kagan says Kalshi doesn’t function like a sports book in that it doesn’t set odds and doesn’t profit off of losses.
“From a consumer protection perspective, we’re very different. It’s in their incentive to find losers and then target them over and over and over again to keep them coming back. Because of course, if you’re competing against someone and you want to win, you probably want to compete against somebody who will lose. Whereas we’re not competing at all,” she said. “We’re totally hands off with the pricing that’s set by people that are trading on that market. So we’re totally agnostic to what the outcome is.”
A key distinction in Missouri’s push on the issue appears to be the age of the consumer. Under rules approved by Missouri voters when sports betting was legalized in 2024, wagers are limited to consumers 21 and older. Prediction markets allow “event contracts” at the age of 18.
The attorney general’s office letters went out to the firms on Sept. 16 and 17, giving the recipients a month to show compliance with Missouri law or cease sports wagering activities here. A spokesperson said Friday there could be further investigative steps or a lawsuit filed afterward, although the office did not confirm a specific timeline for those events.
Source: spectrumlocalnews.com
