Kentucky Sues Kalshi, Polymarket Over Sports Contracts
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- Kentucky Attorney General Russell Coleman filed state court lawsuits against Polymarket, Kalshi, and Kalshi partners Coinbase, Robinhood, and Webull, accusing them of running "unlicensed and illegal sports betting and gambling platforms."
- Kalshi and Polymarket recorded $25 billion in combined monthly trading volume in May per Token Terminal, and at least 17 other US states have also taken prediction market operators to court.
- The CFTC has sued eight states for moving against prediction markets, claiming they overstepped its federal authority, and the White House has gotten involved in the multi-state legal fight.
- A Michigan federal judge ruled against Polymarket on Wednesday, finding its sports event contracts are not swaps under CFTC authority, while the Third Circuit Court of Appeals sided with Kalshi in April against New Jersey regulators.
- Kalshi and Polymarket filed their own suit against Kentucky on Friday, calling the state's first-in-the-nation 14.25% tax on prediction market transaction fees discriminatory and an overreach of federal law.
- President Donald Trump, whose son Donald Trump Jr. sits on Polymarket's advisory board and advises Kalshi, said in May that "it is critically important that the CFTC's exclusive authority over Prediction Markets is maintained."
Why it matters: Kentucky's lawsuit lands directly opposite the Trump administration's position, which backs exclusive CFTC oversight of prediction markets. With Kalshi and Polymarket already suing Kentucky over its 14.25% transaction tax and courts split on whether sports event contracts qualify as CFTC-regulated swaps, the 18-state legal fight is now barreling toward a potential Supreme Court showdown over who regulates the $25 billion-a-month industry.
