Kentucky Attorney General Russell Coleman has filed lawsuits against prediction market platforms Kalshi and Polymarket, accusing them of operating illegal sports betting in the state. The suits, lodged in Franklin Circuit Court, also name Kalshi’s partners Coinbase, Robinhood, and Webull for allegedly failing to provide resources for problem gambling, as required by Kentucky law.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman stated. He contends that the platforms offer markets on game winners, point spreads, and player statistics without a state gaming license, fitting the state's definition of sports wagering.
Both platforms reject state control, arguing their event contracts are swaps under federal commodities law, regulated by the Commodity Futures Trading Commission (CFTC). A Kalshi spokesperson said, “The CFTC is our regulator, not the states.” Polymarket called the lawsuit a challenge to the CFTC's framework and vowed to address claims through legal process.
The Kentucky actions escalate a nationwide legal battle. At least 18 states have taken steps against prediction market operators, while the CFTC has sued eight states, asserting exclusive federal authority. Court rulings have split: the Third Circuit sided with Kalshi in a New Jersey case, but on the same day Kentucky sued, a Michigan federal judge ruled against Polymarket. The tension puts Kentucky, a state that voted heavily for Trump, at odds with the president’s public stance that the CFTC alone should oversee prediction markets.
Adding to the pressure, Kalshi and Polymarket had already sued Kentucky over a 14.25% tax on prediction market transaction fees, calling it discriminatory. Together, the two platforms recorded $25 billion in monthly trading volume in May, and Kalshi recently expanded into crypto perpetual futures. The outcome of these cases could determine which rules apply to prediction markets across the U.S.
