In brief
- Kentucky sued Kalshi and Polymarket, alleging they operate illegal sports betting platforms.
- The platforms argue their contracts fall under CFTC oversight, a position backed by the Trump administration.
- The growing state-federal legal fight is expected to ultimately be decided by the U.S. Supreme Court.
Kentucky became the latest state to sue prediction market platforms this week, accusing industry leaders Kalshi and Polymarket of operating illegal sports betting platforms.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” the state’s attorney general, Russell Coleman, said in a statement. “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test.”
Kentucky is one of numerous states across the country that have taken legal action against prediction market platforms in recent months, over alleged violations of state-level gambling laws.
The platforms claim their wagers, even those that appear indistinguishable from sports bets to users, should be considered swaps under the federal jurisdiction of the CFTC—a view supported by President Donald Trump’s industry-friendly administration.
The federal government, under President Trump’s control, has been particularly aggressive in its escalating battle against red and blue states alike over the regulation of prediction markets. The CFTC and Justice Department have sued several states for attempting to regulate the novel platforms, and have pledged to sue any other states that try to do the same.
Those threats appear not to have deterred additional states from making their voices heard on the subject.
In its lawsuit, Kentucky regulators argued that by avoiding registration as gambling platforms, Kalshi and Polymarket have neglected certain critical obligations, including providing resources to users to combat gambling addiction.
The state also sued VGW, an online casino platform allegedly offering illegal sweepstakes.
As lawsuits pertaining to prediction market regulation fly back and forth across the country, results have varied. In the Sixth Circuit, for instance, which oversees federal courts in Kentucky, Ohio, Tennessee, and Michigan, two district court judges have preliminarily sided with state regulators, while one has sided with the prediction markets themselves.
The issue is likely to ultimately be decided by the U.S. Supreme Court.
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