North American Derivatives Exchange (NADEX), a US derivatives exchange affiliated with crypto exchange Crypto.com, and Ludlow Exchange, the operator of prediction market Novig, each filed suit against Missouri authorities in federal court on October 16. They are seeking to prevent the state from applying its sports betting regulations to sports event contracts.
In September, the Missouri attorney general ordered prediction market operators including the two companies to stop offering sports event contracts or obtain a state license. The state argues that products allowing users to trade on predicted sports outcomes constitute sports betting offered to Missouri residents and therefore must comply with state regulations.
Novig said it is an exchange designated by the US Commodity Futures Trading Commission (CFTC), the federal derivatives regulator. Its complaint argues that its sports event contracts are "swaps" under the federal Commodity Exchange Act and that the CFTC has exclusive regulatory authority over such contracts when traded on a designated exchange. On that basis, it contends that Missouri's sports betting law cannot be applied. The issue is whether exchanges under federal oversight can also be required to obtain state licenses and comply with state sports betting regulations. Filing the lawsuits does not itself prevent the state regulations from applying.