Kentucky Sues Kalshi and Polymarket Over Illegal Sports Betting Claims

TLDR

• Kentucky Attorney General Russell Coleman sued Kalshi and Polymarket, accusing them of running unlicensed sports betting operations in the state
• The lawsuit also names Kalshi partners Coinbase, Robinhood, and Webull for not providing gambling problem resources
• Kentucky joins at least 18 other states in legal fights against prediction market platforms
• The CFTC has countersued eight states, arguing federal law gives it sole authority over prediction markets
• A Michigan federal judge ruled against Polymarket on the same day, while other courts have sided with the platforms

Kentucky Attorney General Russell Coleman filed lawsuits in state court this week against prediction market platforms Kalshi and Polymarket. The suits accuse both companies of operating unlicensed sports betting in the state.

The filings also name Kalshi’s partners Coinbase, Robinhood, and Webull. The state says these companies failed to provide resources for people with gambling problems, which is required under Kentucky law.

Together, Kalshi and Polymarket recorded $25 billion in monthly trading volume in May, according to Token Terminal. Being locked out of major U.S. states could hurt that growth.

Kalshi and Polymarket say they are federally regulated exchanges. They argue their event contracts are swaps under federal commodities law, not sports bets under state law.

A Republican State Clashes With a Trump Policy Position

The lawsuit puts Kentucky in an unusual position. The state voted for President Donald Trump by 64% in 2024. But its action directly contradicts Trump’s public stance on prediction markets.

Trump has said on Truth Social that the CFTC should have exclusive authority over prediction markets. He called state-level opponents “SCUM” and praised CFTC Chairman Mike Selig.

The CFTC has now sued eight states that moved against prediction market platforms, arguing they are overstepping federal authority. Kentucky could be next.

Coleman, a Republican and former Trump-appointed U.S. attorney, is pressing ahead regardless.

Polymarket said Kentucky’s action “runs counter to the CFTC’s established framework.” The company said it looks forward to addressing the claims through the legal process.

Courts Divided as Cases Mount

Courts have not been consistent in their rulings. On the same day Kentucky filed its lawsuit, a Michigan federal judge ruled against Polymarket, finding its sports event contracts are not covered by federal commodities law.

However, the Third Circuit Court of Appeals ruled in April that New Jersey could not stop Kalshi from offering sports event contracts in the state.

At least 17 other states have now taken prediction market operators to court. Legal observers expect the matter to eventually reach the U.S. Supreme Court.

Kalshi and Polymarket had already sued Kentucky earlier over the state’s 14.25% tax on prediction market transaction fees, calling it discriminatory.

Trump’s son, Donald Trump Jr., sits on Polymarket’s advisory board and is an adviser to Kalshi.

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