Key facts
- Kentucky has sued prediction market platforms Kalshi and Polymarket.
- The state accuses the platforms of operating unlicensed and illegal sports betting and gambling operations.
- This legal action follows a lawsuit filed by Kalshi and Polymarket against Kentucky over a new 14.25% tax on prediction market transaction fees.
- The CFTC considers prediction market contracts to be regulated swaps and has previously challenged state actions against these platforms.
- President Donald Trump's administration has supported the CFTC's exclusive authority over prediction markets.
Kentucky has initiated legal action against prediction market platforms Kalshi and Polymarket, accusing them of operating unlicensed and illegal sports betting and gambling platforms within the state. State Attorney General Russell Coleman announced the lawsuits, placing Kentucky among at least 17 other states that have pursued legal action against prediction market operators over sports event contracts.
Coleman stated that these corporations are breaking Kentucky's laws and enabling betting similar to a sportsbook. The platforms, which saw $25 billion in monthly trading volume in May, are accused of conducting business without a required Kentucky gaming license and offering sports event contracts that fall under 'sports wagering.' The state also alleges they provide insufficient resources for users to identify or seek help for gambling problems.
This lawsuit adds to the conflict between states and prediction markets. While state authorities argue that sports-related event contracts constitute sports betting requiring state licenses, prediction markets contend they are swaps regulated by the federal Commodity Futures Trading Commission (CFTC). The CFTC has previously sued states that have taken action against these platforms, asserting its exclusive regulatory authority.
Adding to the complexity, Kalshi and Polymarket had previously sued Kentucky over its new 14.25% excise tax on prediction market transaction fees, arguing it is discriminatory, unconstitutional, and preempted by federal law. President Donald Trump has previously voiced support for the CFTC's exclusive authority over prediction markets, a stance that may create friction with state-level regulatory actions.