Prediction Market Platforms File Federal Lawsuits to Block Gambling Law Enforcement in Arkansas and Missouri

Federal courts in Arkansas and Missouri handled a series of lawsuits this week as Polymarket US, Crypto.com, Underdog, and Robinhood sought injunctions against state enforcement of gambling laws. Polymarket US sued both states, Crypto.com sued Arkansas, and Underdog plus Robinhood sued Missouri. The filings follow Arkansas suing Kalshi in state court last week, prompting other platforms to act first in federal court.

According to reporting by InGame, each complaint seeks to prevent the states from treating the platforms as unlawful gambling operations. The suits center on claims that federal authority under the Commodity Exchange Act overrides state rules.

Core Arguments Invoke CEA Preemption and Supremacy Clause

In the Arkansas complaint, Polymarket states that the Commodity Exchange Act was intended to preempt state gambling laws, citing past efforts to regulate commodity futures trading as gambling. The filing reads: “Arkansas is attempting to relitigate a debate Congress settled over 50 years ago. Back then, too, States treated derivatives trading as unlawful gambling. That is one reason why, in 1974, Congress amended the CEA to grant the CFTC ‘exclusive jurisdiction’ over certain derivatives ‘traded or executed on a contract market designated’ under the Act.”

Polymarket adds that enforcement would cause irreparable harm: “The harm resulting from state enforcement would be irreparable. Even a meritless state enforcement action would immediately disrupt Polymarket US’s federally authorized operations, fragment a national market, reduce liquidity, jeopardize critical banking and commercial relationships, undermine user trust, and harm Arkansas residents.”

In Missouri, Underdog argues that enforcement violates the Supremacy Clause. Its complaint notes that the CFTC has confirmed this position “in each of the amicus briefs, motions to intervene, emergency orders, and nine litigations it has filed across the country.” Missouri sent cease-and-desist letters in September directing platforms to exit or obtain a license from the Missouri Gaming Commission. Underdog had earlier withdrawn a sports betting license application in the state.

CFTC Notice on Geofencing Adds New Variable

A CFTC notice published Thursday instructed exchanges to stop geofencing states or explain why they cannot. It is unclear whether state court orders will qualify as acceptable reasons for geofencing, given past CFTC directions to Kalshi to defy such orders. The potential for CFTC action could change how courts assess the balance of harms when weighing injunction requests.

As legal analyst @WALLACHLEGAL posted on X: “Robinhood sues Missouri too. Heel turn alert: Gibson Dunn argues for Polymarket that Missouri’s sports betting laws violate the dormant Commerce Clause. Ted Olson must be turning in his grave. He and Gibson Dunn fought against federal interference with state sports betting laws.”