CFTC files federal lawsuit against Kentucky over prediction market regulation

The U.S. Commodity Futures Trading Commission (CFTC) has filed a lawsuit in federal court to stop Kentucky from enforcing state gaming laws against prediction‑market platforms such as Kalshi and Polymarket. The regulator argues that event contracts offered by these platforms are swaps governed by federal commodities law, giving the CFTC exclusive jurisdiction, and challenges Kentucky’s 14.25% excise tax on transaction fees. The complaint names Governor Andrew Beshear, Attorney General Russell Coleman and the Kentucky Horse Racing and Gaming Corporation as defendants. CFTC Chair Michael S. Selig said, “Kentucky is the latest state attempting to shut down federally‑regulated event contracts.” Kentucky becomes the ninth state sued by the CFTC in its broader effort to preempt state restrictions on prediction markets.

In a related development, prediction‑market operator Kalshi has sued Illinois officials, alleging that a new state law requiring licensing for sports‑event contracts usurps the CFTC’s authority. Kalshi argues the law would cause irreparable harm and asserts that federal law preempts the state requirements. Both actions illustrate an ongoing jurisdictional clash between the federal regulator and state authorities over the status of prediction‑market products.