Kentucky Sues Prediction Markets Over Sports Event Contracts

Kentucky has sued five prediction market platforms, including Kalshi and Polymarket, adding to a wave of US states launching legal fights with prediction markets over sports event contracts.

State Attorney General Russell Coleman said in a statement Wednesday that his office filed lawsuits in state court against Polymarket and Kalshi — also naming Kalshi partners Coinbase, Robinhood and Webull — accusing them of “operating unlicensed and illegal sports betting and gambling platforms.”

“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman said. “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test. As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck…’”

Kalshi and Polymarket together recorded $25 billion in monthly trading volume in May, per Token Terminal. Lawsuits from multiple US states risk locking them out of some of the largest markets in the US.

Kentucky Attorney General Russell Coleman gives a speech in April. Source: YouTube

At least 17 other states have taken prediction market operators to court, attracting the involvement of the US Commodity Futures Trading Commission and the White House.

Multiple state authorities have argued that event contracts tied to sports are sports betting and require state-level licenses. Prediction markets have argued that their event contracts are swaps regulated under federal commodities law.

That position is backed by the CFTC, which has sued eight states after they took action against prediction markets, claiming they were stepping on its authority.

Kentucky’s lawsuits claimed that Polymarket, Kalshi and their partners are “doing business without a Kentucky gaming license or following state regulations” and that their sports event contracts “fall squarely within the definition of ‘sports wagering’ under Kentucky law.”

The state also alleged the platforms offer users “few or no resources” to identify or seek help for a gambling problem as required by state law. 

A Polymarket spokesperson told Cointelegraph Kentucky’s action “runs counter to the CFTC’s established framework for regulating prediction markets. We look forward to addressing these claims through the appropriate legal process.”

Kalshi spokesperson Jacki McGavick told Cointelegraph that “Kalshi is a federally regulated exchange — the CFTC is our regulator, not the states. Courts have already recognized this, and we’re confident they will here too.”

The CFTC did not immediately respond to a request for comment.

Related: Prediction market battle gets closer to Supreme Court

Kalshi and Polymarket, through a coalition of platforms, are already tied up in legal action with Kentucky after suing the state on Friday to claim its first-in-the-country 14.25% tax on prediction market transaction fees is discriminatory and oversteps federal law.

Kentucky’s action comes after authorities in Montana, Nevada, Utah, Iowa, Illinois, Ohio, Tennessee, New York, New Jersey, Connecticut and Maryland had issued cease-and-desist letters to prediction markets and were subsequently sued by the platforms.

Washington, Arizona, New Mexico, Wisconsin, Michigan, Massachusetts and Kentucky have also chosen to sue prediction market platforms, including Kalshi.

Some of the legal battles have so far reached appeals courts and have seen mixed results. On Wednesday, a Michigan federal judge ruled against Polymarket in its lawsuit against the state, finding that its sports event contracts are not swaps under the CFTC’s authority.

Other courts have also sided with prediction markets, such as the Third Circuit Court of Appeals’ ruling in April that New Jersey regulators could not prevent Kalshi from offering sports event contracts in the state.

US President Donald Trump, whose son Donald Trump Jr. is on the advisory board for Polymarket and is an adviser to Kalshi, said in May that it was “critically important that the CFTC’s exclusive authority over Prediction Markets is maintained.”

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