Kentucky sues prediction market platforms Kalshi and Polymarket over alleged illegal sports betting

Kentucky filed lawsuits in state court against prediction‑market exchanges Kalshi and Polymarket, also naming their partners Coinbase, Robinhood and Webull. The state accuses the platforms of operating unlicensed sports‑betting services, arguing that the event contracts offered on the sites are "sports event contracts" that fall under Kentucky gambling law. Attorney General Russell Coleman said, "Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws."

Both companies contend the contracts are swaps regulated by the Commodity Futures Trading Commission, not gambling products. Kalshi’s spokesperson affirmed the firm is a "federally regulated exchange" under CFTC oversight, while Polymarket called the lawsuit "counter to the CFTC’s established framework for regulating prediction markets." The dispute reflects a broader clash between state gaming regulators and the federal CFTC, with at least 17 other states pursuing similar actions. Legal experts expect the conflict could ultimately be decided by the U.S. Supreme Court.