Kentucky Attorney General Russell Coleman filed three lawsuits on Wednesday against prediction market platforms Kalshi and Polymarket, accusing them of operating unlicensed illegal sports betting and gambling platforms in the state. The lawsuits target Kalshi and its affiliates including Coinbase, Polymarket and its affiliates, and online casino platform VGW. The state argues these platforms bypass consumer protection and tax requirements under gambling laws while operating without a Kentucky gaming license, amid an ongoing jurisdictional dispute between state regulators and the Commodity Futures Trading Commission over prediction markets.
Kentucky Accuses Platforms of Illegal Sports Betting Operations
According to a Wednesday statement from Kentucky's Attorney General, Coleman said, "Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws. These multi-billion dollar corporations and their legal fictions don't pass the sniff test."
The state took issue with the platforms' offering of sports-related event contracts, saying that 89% of Kalshi's $23 billion contract volume came from sports wagering. Kentucky also said Polymarket spreads "false and misleading" advertisements that it is allowed to offer sports betting in Kentucky.
The statement said, "[Polymarket] offers many of the same traditional sports bets that a licensed sportsbook would, including money lines, spreads, point totals, parlays and prop bets. Simply calling them 'sports event contracts' doesn't make them legal."
Coinbase was included in the lawsuit as it split fees with Kalshi on bets made through the crypto exchange, according to the statement. Robinhood and Webull were also mentioned in the statement as affiliated entities of Polymarket.
CFTC Disputes State Authority Over Prediction Markets
Kentucky's action extends the jurisdictional dispute between state regulators and the Commodity Futures Trading Commission over prediction markets. More than a dozen states claimed that sports-related prediction markets violate state gaming and gambling laws.
The CFTC has insisted that it holds exclusive federal jurisdiction over licensed platforms under the Commodity Exchange Act, which preempts state-level gambling laws. The agency also sued multiple states over their attempts to restrict prediction market platforms.
Last week, the CFTC proposed new rules that would reinforce support for sports-related bets on prediction markets, while limiting those linked to terrorism, assassinations, and war. The agency said in its proposed rule, "The Commission observes that prediction markets have successfully listed for trading a wide variety of event contracts based on sports activities. The Commission preliminarily finds that certain characteristics of event contracts involving sports activities would reduce the basis for finding that the event contracts are contrary to the public interest."
Gaming Industry Groups Challenge Sports Prediction Markets
State regulators are not the only forces pushing back against sports prediction markets. U.S. gaming industry groups have reportedly sent a letter to the Senate, urging lawmakers to include language in the Clarity Act banning sports event contracts.
FAQ
What did Kentucky's Attorney General file lawsuits against Kalshi and Polymarket for?
Kentucky Attorney General Russell Coleman filed lawsuits on Wednesday accusing Kalshi and Polymarket of operating unlicensed illegal sports betting and gambling platforms in the state. The state argues these platforms bypass consumer protection and tax requirements under gambling laws while operating without a Kentucky gaming license.
Why was Coinbase included in Kentucky's lawsuit against Kalshi?
Coinbase was included in the lawsuit because it split fees with Kalshi on bets made through the crypto exchange, according to the statement from Kentucky's Attorney General.
What is the jurisdictional dispute between states and the CFTC over prediction markets?
More than a dozen states claimed that sports-related prediction markets violate state gaming and gambling laws. The CFTC has insisted that it holds exclusive federal jurisdiction over licensed platforms under the Commodity Exchange Act, which preempts state-level gambling laws, and the agency sued multiple states over their attempts to restrict prediction market platforms.
