Kalshi Sues Missouri Gaming Commission Over Cease And Desist Order

Hanaway sent the letter on September 16, stating that Kalshi operates an unlicensed online sports wagering platform in Missouri. 

It gave the company two choices: stop offering the contracts to Missourians, or obtain a Gaming Commission license, pay the related taxes and fees and stop serving anyone under 21.

The original deadline was October 16. According to the complaint, the Attorney General's office extended it by two weeks to October 30, but on October 27, the state's Solicitor General told Kalshi that the state would not agree to hold off on enforcement. Kalshi says that left it facing an imminent enforcement action.

Missouri has set out heavy penalties for unlicensed operators. The complaint points to a class E felony for promoting gambling in the first degree and administrative fines of $50,000 per violation, or $100,000 for violations arising from the same occurrence. 

The state's sports wagering regime imposes a 10% tax on wagers.

Kalshi's case rests on the Commodity Exchange Act, which it says gives the CFTC exclusive jurisdiction over swaps traded on designated contract markets. 

The company argues that its event contracts constitute swaps and that the Supremacy Clause bars Missouri from imposing its own rules.

It also says the licensing route is not realistic. According to the complaint, retail licenses in Missouri can only go to licensed online casino sites, professional sports teams or operators acting on their behalf, which Kalshi says leaves it with no workable path to a license. 

Shutting down, it adds, could put it in conflict with the CFTC's impartial access requirement for exchanges.

The defendants include Hanaway, the Gaming Commission, Executive Director Michael Leara, and the five commissioners: Jan Zimmerman, Kevin Spaulding, Kevin Cantwell, Sam Gladney, and Roger Stottlemyre.

The state has been public about its view. A spokesperson for the Attorney General's office told Courthouse News that a bet on the Chiefs beating the Broncos should follow the same rules whether it is placed through a prediction market or at a casino, because both are sports betting, and that voters chose to subject sports betting to licensing and taxation.

The cease-and-desist letter said Missouri shares the view of most federal courts that Kalshi's platform is subject to state gambling laws. 

Hanaway also signed an amicus brief on October 7 asking the US Supreme Court to review a Third Circuit decision in Kalshi's favor, and the Gaming Commission's director wrote to the CFTC in April urging it to leave jurisdiction over sports-event contracts to the states.

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Courts have not spoken with one voice. Kalshi's complaint notes that the Sixth Circuit ruled in September that its event contracts are not swaps and that the Commodity Exchange Act does not override Ohio or Tennessee gambling law. 

District courts in Arizona, Minnesota and Illinois, on the other hand, have issued preliminary injunctions in favor of Kalshi and similar exchanges.

The CFTC has sued a string of states, including Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, New Mexico, Kentucky and Utah, to block enforcement of their gambling laws against prediction markets. 

Our guide to the CFTC versus the states tracks the development of those cases.

For Missouri residents who want a regulated way to bet, the state's licensed operators are clearly the legal option today. 

You can compare licensed US sportsbooks before signing up.