Missouri Regulator Monitors Rise of Unregulated Prediction Markets After Sports Betting Launch

Following Missouri's rollout of legal sports wagering, attention in the gambling sector has shifted to the rapid growth of online prediction markets operating outside state regulatory frameworks. These are growing in popularity, but so is the controversy surrounding them.

Platforms such as Kalshi and Polymarket allow customers to stake money on a broad range of outcomes, from international political events to celebrity-related scenarios. Major operators, including DraftKings, FanDuel, and Fanatics, have begun launching their own versions of these markets, viewing them as a potential next step for the industry.

Missouri Gaming Commission (MGC) Chair Jan Zimmerman said in an interview with Fox News that the breadth of questions available on these platforms demonstrates their expanding reach. She noted that the agency intends to monitor the development of prediction market apps.

Zimmerman pointed out that these markets operate more like financial exchanges and fall under federal oversight, rather than traditional state gambling regulations. In an interview, she stated that it remains unclear how the courts will shape the regulatory landscape and that her team plans to monitor how national legal challenges unfold.

Additionally, Zimmerman highlighted the recent disputes in states with established gambling sectors, where regulators issued cease-and-desist orders to certain prediction market operators. 

Those actions resulted in court challenges in states such as Nevada and New Jersey. She said that Missouri may eventually face similar decisions as the legal environment continues to evolve and these markets gain further popularity among consumers.

Underdog shifts strategy

The rise of these prediction market platforms has already influenced business decisions in Missouri's gambling industry. Underdog Sports, one of the largest daily fantasy sports operators in the country, withdrew its temporary sports betting license shortly before the launch of the legal Missouri sports betting market.

The course change came despite significant promotional activity and partnerships with the St. Louis Blues and Kansas City Royals. The MGC confirmed the withdrawal and said the company opted to pursue opportunities in the rapidly growing prediction market sector.

MGC Executive Director Mike Leara stated that the company chose to pivot because prediction markets face significantly lighter regulatory requirements and are not subject to state taxation in the same manner as traditional sportsbooks. 

Underdog introduced a prediction market product in September through a partnership with Crypto.com, allowing users to trade event-based sports contracts across major leagues. That platform is already accessible in Missouri.

The operator continues to run daily fantasy sports contests in 40 states, Washington, DC, and Ontario. The Commission said Underdog remains in good standing in Missouri and still holds its fantasy sports contest license. With Underdog stepping back from the sports betting market, eight licensed operators remain active in the state.