Kalshi Sues Missouri Gaming Commission Over Cease And Desist Order

Kalshi has taken the Missouri Gaming Commission and several state officials to federal court. The company contends that Missouri has no business regulating its sports-event contracts, since federal law hands that power to the Commodity Futures Trading Commission.

The complaint landed in the Eastern District of Missouri on October 27. It challenges a cease-and-desist letter issued by Attorney General Catherine Hanaway.

The filing comes on the heels of a similar suit from Novig earlier in the month. Kalshi is asking for a temporary restraining order, a preliminary injunction and a permanent injunction.

The Cease And Desist Order

Hanaway's letter, dated September 16, accused Kalshi of running an unlicensed online sports wagering platform in the state.

It presented the company with two options: pull the contracts from Missouri residents, or get a Gaming Commission license, pay the associated taxes and fees, and stop serving anyone under 21.

The initial deadline was October 16. Kalshi's complaint says the Attorney General's office pushed it back two weeks to October 30 — but on October 27, the state's Solicitor General informed the company that Missouri would not hold off on enforcement. That, according to Kalshi, left it staring down imminent action.

Missouri's penalties for unlicensed operators are steep. The complaint cites a class E felony for promoting gambling in the first degree, plus administrative fines of $50,000 per violation — or $100,000 when the violations stem from the same occurrence.

Under the state's sports wagering regime, wagers carry a 10% tax.

Kalshi's Argument

Kalshi builds its case on the Commodity Exchange Act, which it says grants the CFTC exclusive jurisdiction over swaps traded on designated contract markets.

Its event contracts qualify as swaps, the company argues, and the Supremacy Clause prevents Missouri from layering its own rules on top.

Licensing, meanwhile, isn't a realistic alternative. Retail licenses in Missouri go only to licensed casinos, professional sports teams or operators working on their behalf, according to the complaint — which Kalshi says leaves it no workable route to a license.

And shutting down could put the company at odds with the CFTC's impartial access requirement for exchanges.

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

Missouri's Position

The state hasn't been shy about where it stands. A spokesperson for the Attorney General's office told Courthouse News that a wager on the Chiefs beating the Broncos should face the same rules whether it's placed on a prediction market or at a casino — both are sports betting, and voters opted to subject sports betting to licensing and taxation.

In the cease-and-desist letter, the state said it sides with the majority of federal courts in finding that Kalshi's platform falls under state gambling laws.

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

Where The Wider Fight Stands

The courts have hardly been unanimous. Kalshi's complaint points out that the Sixth Circuit ruled in September that its event contracts are not swaps and that the Commodity Exchange Act does not preempt Ohio or Tennessee gambling law.

District courts in Arizona, Minnesota and Illinois, by contrast, have granted preliminary injunctions favoring Kalshi and similar exchanges.

The CFTC has sued a long list of states — Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, New Mexico, Kentucky and Utah — to stop them from enforcing gambling laws against prediction markets.

Our guide to the CFTC versus the states tracks how those cases are developing.

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