The Commodity Futures Trading Commission sued Kentucky on Tuesday, escalating a federal-state fight over whether prediction market platforms fall under federal commodities law or state gambling regulation.
The case follows Kentucky Attorney General Russell Coleman’s lawsuit last week against Kalshi and Polymarket, which accused the companies of operating illegal sportsbooks and violating state law.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” said Kentucky Attorney General Russell Coleman in a press release last week announcing the suit against the two firms.
“These multi-billion dollar corporations and their legal fictions don’t pass the sniff test,” Coleman said. “As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck…’”
Kentucky Attorney General Russell Coleman
The CFTC argues the platforms offer federally regulated event contracts classified as swaps, placing them under the agency’s authority. States challenging the platforms say sports-related event contracts resemble sports betting, which they regulate.
“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” CFTC Chair Michael Selig said in a statement. “Prediction markets provide Kentuckians with valuable information about the likelihood of future events and offer risk management products relied on by Kentucky businesses and individuals.”
“As I’ve consistently pledged, the CFTC is firmly committed to maintaining its exclusive jurisdiction over prediction markets, and today’s lawsuit against Kentucky is yet another example of the Commission protecting its federal interests,” he continued.
Kentucky is the ninth state sued by the CFTC in the dispute and the first with a Republican attorney general.
Twenty states are actively involved in litigation against prediction market platforms, and one has moved to ban them. Kentucky also enacted an excise tax on the platforms earlier this year, a move that also drew criticism from the CFTC.
The agency has increased efforts to assert its jurisdiction since Selig’s confirmation as chair late last year. In February, Selig said he would challenge any state that attempted to regulate the platforms. President Trump also said late last month that it was “critically important” for the CFTC to have exclusive authority over prediction markets.