Crypto.com’s exchange affiliate and Novig are challenging Missouri’s attempt to regulate their sports event contracts as gambling. They argue that federal commodities law applies instead. The dispute hinges on two questions: whether the contracts qualify as derivatives under federal law, and whether that law prevents Missouri from enforcing specific state gambling rules.
- Missouri told six operators to get state licenses or stop offering sports contracts to residents.
- Crypto.com’s North American Derivatives Exchange and Novig’s Ludlow Exchange filed separate federal lawsuits on October 16, 2026, according to The Block.
- Federal appeals courts disagree on how commodities law applies to sports prediction markets.
Two operators challenge Missouri’s demands
The Block reported that North American Derivatives Exchange, which operates the exchange behind Crypto.com’s OG prediction-market platform, and Ludlow Exchange LLC, which operates Novig’s market, filed separate lawsuits in Missouri on October 16, 2026. The suits challenge cease-and-desist notices issued by Attorney General Catherine Hanaway in September.
Missouri sent notices to six operators: Kalshi, Polymarket, Robinhood, Underdog, Crypto.com and Novig. They had 30 days to obtain state licenses or stop offering the disputed contracts to Missouri residents. The Block’s review of federal court records found that Crypto.com’s exchange and Novig were the only two of the six to sue in Missouri at that point. Similar state efforts have targeted prediction-market operators elsewhere, including Tennessee’s crackdown.
The state says sports event contracts offered to residents amount to sports wagering and must comply with Missouri law. The companies argue that their contracts fall under federal commodities law. These are competing legal arguments, not findings by a court in the Missouri cases.
Missouri’s sports-wagering framework requires licensed operators to pay a 10% tax on gross sports-betting receipts and bars people under 21 from wagering. Hanaway’s notice to Crypto.com alleged that users as young as 18 could trade its sports event contracts. Her office also alleged that five of the six targeted operators either allowed underage access or lacked adequate safeguards. Its public announcement did not include Novig in that specific age-related allegation.
“Companies cannot repackage sports bets as ‘event contracts’ to avoid Missouri law, ” Hanaway said.
What federal law does and does not settle
The exchanges’ central argument is federal preemption, the principle that federal law can take precedence over conflicting state law. They say the Commodity Exchange Act (CEA) puts qualifying derivatives traded on federally regulated markets under the Commodity Futures Trading Commission’s (CFTC) authority, limiting Missouri’s power to regulate those contracts as ordinary sports bets.
A swap is a type of derivatives contract whose payments are tied to an event, asset, rate or other measure. A CFTC-designated contract market, or DCM, is a federally regulated exchange. But DCM status alone does not establish that every contract listed on an exchange qualifies as a swap under the CEA, or that every state gambling rule is preempted. Courts have disagreed both on how to classify sports contracts and on the reach of federal preemption, including in legal actions involving Kalshi’s sports event contracts.
A Sheppard Mullin analysis published October 1, 2026, describes a split among federal appeals courts. In KalshiEX, LLC v. Flaherty, the Third Circuit held that Kalshi’s sports contracts were swaps and affirmed a preliminary injunction against New Jersey enforcement. The ruling addressed preliminary relief, not every issue in the dispute. It has been described as holding that federal law preempts New Jersey from banning Kalshi’s contracts.
The Ninth Circuit reached a different conclusion in KalshiEX LLC v. Assad. It found that the contracts at issue likely were not swaps and affirmed the dissolution of an injunction. The Sixth Circuit, in KalshiEX LLC v. Schuler, also found that the contracts did not qualify as swaps. It went on to conclude that even if they did, the state gambling laws before it were not preempted in that case. The Sixth Circuit decision adds to the disagreement over prediction-market contracts and state sports-betting laws.
The Sixth Circuit said an event must have an inherent economic connection to a potential financial, economic or commercial consequence. Indirect effects on advertisers, sponsors or local businesses were not enough. The court also distinguished direct regulation of DCM operations from state gambling laws that, in its view, only incidentally burdened exchanges offering sports contracts.
The decisions arose from different records and legal questions, and they are at different stages. They do not establish one uniform nationwide rule. Federal oversight may matter, but it does not automatically turn every sports bet into a federally protected financial product.
What the Missouri lawsuits seek
North American Derivatives Exchange seeks a declaratory judgment clarifying its legal rights and a permanent injunction barring Missouri from enforcing its gambling laws against the disputed contracts. Its complaint also argues that the state sent its cease-and-desist notice to Foris DAX, Inc., rather than to the exchange operating the market.
Crypto.com’s complaint says state licensing is not a practical alternative because Missouri’s constitution provides for only two direct mobile sports-wagering licenses, and both have already been awarded. The state’s notices still gave operators the choice to get licenses or stop offering the contracts. The court will have to assess whether another licensing route is available and whether the company’s argument affects the outcome.
Novig sued through Ludlow Exchange in the Eastern District of Missouri. The company seeks preliminary and permanent injunctions against enforcement of Missouri gambling laws as they apply to its sports contracts. A preliminary injunction would temporarily block enforcement while the case proceeds. Asking for one does not mean a judge has granted it.
Novig’s request for preliminary relief cites a pending Iowa appeal before the Eighth Circuit and asks the Missouri court to preserve the status quo while that appeal proceeds. The Eighth Circuit’s decision could offer relevant guidance, but its effect on the Missouri cases is not yet clear. The Block’s review of the publicly accessible Missouri docket confirmed Novig’s filing but did not establish that the court had granted its requested injunction. Separately, Crypto.com and Novig have sued Missouri over the state’s effort to regulate sports prediction markets.
Why the dispute matters beyond Missouri
The cases could determine whether prediction-market operators must obtain state gambling licenses, restrict access by state, enforce state-specific age checks or change how they structure their sports contracts. A ruling for the exchanges could limit some state enforcement against qualifying federally regulated products. A ruling for Missouri could strengthen states’ ability to treat similar contracts as sports wagering.
There are real concerns on both sides. Different state licensing and consumer-protection rules can make nationwide operations more complicated. But federal regulation does not provide a blanket exemption from state law, and allegations about underage access deserve scrutiny regardless of how a court classifies the products. The outcome will depend on the contracts, the laws at issue and the evidence. Calling a product an “event contract” or a “bet” will not settle the question.
Key questions and answers
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What are Crypto.com and Novig challenging?
They are challenging Missouri’s effort to apply state sports-wagering laws to their sports event contracts, including the demand to get licenses or stop offering them to residents.
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Does CFTC oversight automatically override state gambling laws?
No. Courts disagree on whether these contracts qualify as swaps under federal law and whether federal rules preempt the state laws at issue.
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Has a Missouri court blocked enforcement?
The Block’s review of the publicly accessible Missouri docket confirmed Novig’s filing but did not establish that the court had granted its requested injunction.
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What could clarify the legal dispute?
The Missouri cases and related appeals may offer further guidance. Novig has pointed to a pending Iowa appeal before the Eighth Circuit, but its outcome and effect on the Missouri cases remain uncertain.
