Missouri Counterclaims Expand Prediction Market Litigation

Missouri Attorney General Catherine Hanaway’s office filed an answer and three counterclaims against Novig on November 9, 2026, as Robinhood Derivatives’ complaint and Polymarket US’s complaint sought federal orders blocking state gambling enforcement against sports event contracts. The same-day filings center on whether the products are federally regulated derivatives or unlicensed sports wagering.

Robinhood and Polymarket US are seeking declarations and injunctions against Missouri officials in the U.S. District Court for the Eastern District of Missouri. Hanaway instead asks the court to enforce federal and state gambling-related laws against Novig and dismiss its challenge. The sports event contracts at issue are typically binary positions that pay the side that correctly predicts a defined outcome. These are allegations and requested remedies, not court findings.

The new filings follow the Missouri attorney general’s September 18, 2026 announcement that cease-and-desist letters had gone to Polymarket, Kalshi, Crypto.com, Novig, Underdog and Robinhood, describing their sports event contracts as unlicensed sports wagering. The September 16, 2026 letter to Polymarket demanded compliance or cessation within 30 days, including licensure, associated taxes and fees and prevention of wagering by people under 21.

Two Companies, Different Challenges

Robinhood’s case turns on its role as an intermediary. The company describes itself as a futures commission merchant registered with the Commodity Futures Trading Commission (CFTC): customers place orders through its platform, while trades execute on designated contract markets rather than on Robinhood itself. It launched its Prediction Markets Hub on March 17, 2025, and currently intermediates sports-related event-contract trades through Kalshi, Rothera and Nadex. It no longer offers sports-related contracts through ForecastEx.

Robinhood argues that federal preemption covers the entire exchange-traded transaction, including a futures commission merchant accepting or facilitating customer orders, rather than only the exchange executing the trade. Its single Supremacy Clause count seeks declaratory relief, a temporary restraining order and preliminary and permanent injunctions, with alleged irreparable harm to nationwide trading, commercial relationships and customer confidence. The complaint also quotes a November 6, 2026 warning from Missouri’s solicitor general that the attorney general intended to seek a compliance order “in at least three days.”

Polymarket US brings one count alleging preemption by the Commodity Exchange Act, the federal law governing derivatives trading, and a separate Commerce Clause count. Its complaint describes a nationwide CFTC-regulated designated contract market and challenges licensing categories tied to in-state excursion gambling boats and professional sports teams, a requirement that wagering servers be physically located in Missouri and geofencing limited to bettors physically present in the state. On that theory, compliance would require a national exchange to operate as a Missouri-only wagering service.

Polymarket US warns that enforcement could jeopardize partnerships and that removing Missouri users could force existing positions to be unwound, thin nationwide trading and weaken price discovery beyond the state. It seeks a declaratory judgment, preliminary and permanent injunctions, and attorneys’ fees and costs. The complaint expressly does not ask the court to stop Missouri from assessing, levying or collecting taxes, while reserving the right to challenge them in an appropriate forum.

Missouri’s Answer and Counterclaims

The November 9 answer denies that Novig’s sports event contracts qualify as swaps within exclusive CFTC jurisdiction and maintains that they are unlicensed sports wagering subject to Missouri licensing and taxation. Its defenses include ripeness, because no state-court enforcement action has commenced; the Tax Injunction Act, invoked as a jurisdictional bar; and an adequate legal remedy, including raising preemption as a defense in an enforcement proceeding.

Hanaway alleges that Novig’s operation violates the Unlawful Internet Gambling Enforcement Act by accepting financial instruments connected to unlawful internet gambling, amounts to an unfair practice under the Missouri Merchandising Practices Act, a consumer-protection law, and creates a public nuisance under Missouri common law. The federal statute addresses restricted transactions connected to gambling that is unlawful under other federal or state law; it does not itself outlaw gambling activity.

The counterclaims seek to stop Novig from accepting financial instruments from Missouri residents in connection with the alleged unlawful gambling, obtain restitution and civil penalties of up to $1,000 per violation plus investigation and prosecution costs, and secure a public-nuisance declaration and abatement. Hanaway also asks for Novig’s complaint to be dismissed with prejudice. She alleges that the unlicensed operation diverts business from licensed sports wagering, costs Missouri tax revenue and deprives consumers and minors of licensed-market safeguards.

Novig now faces two sets of requests in the same case: its own effort to block state enforcement and Missouri’s effort to restrict the operation and obtain financial remedies. The case now joins two consequential questions: the reach of federal derivatives jurisdiction and Missouri’s ability to pursue gambling and consumer-protection remedies against Novig’s exchange.