CFTC Sues Kentucky to Assert Federal Control Over Prediction Markets; Ninth State Sued

According to The Block, the U.S. Commodity Futures Trading Commission (CFTC) sued Kentucky on June 24 to establish federal regulatory authority over prediction markets. The lawsuit, filed in the U.S. District Court for the Eastern District of Kentucky, follows Kentucky's action last week against platforms Kalshi and Polymarket, alleging illegal sports betting and gambling operations without state permits.

The CFTC argues that Kentucky's attempt to shut down federally regulated designated contract markets violates the exclusive federal framework Congress designed for nationwide swap market regulation. The agency also challenged a Kentucky law imposing a 14.25% tax on prediction market trading fees, stating the requirement would effectively prohibit prediction market operations in the state. Kentucky is the ninth state sued by the CFTC; the agency has previously filed similar lawsuits against Wisconsin, Illinois, Arizona, Connecticut, New York, New Mexico, Minnesota, and Rhode Island.