Kentucky joins the anti-Polymarket coalition: a new blow to prediction markets in the US
On June 17, Kentucky Attorney General Russell Coleman filed lawsuits against two leading prediction market platforms — Kalshi and Polymarket. State authorities insist that under the guise of innovative financial instruments, these services are effectively providing unlicensed sports betting to residents.
The lawsuits were filed in Franklin County Circuit Court. In the documents, both platforms are directly referred to as "illegal bookmaking operations." According to the attorney general's office, Kalshi and Polymarket operate without the required license and do not offer users tools to identify gambling addiction, which violates state law.
The attorney general claims that these platforms allow bets on match winners and individual player statistics. "This is ordinary betting, just under a different name," Coleman stated.
Numbers and Arguments
According to one of the lawsuits, Kalshi's contract volume last year amounted to nearly $23 billion, with 89% of them related to sports. In a selected period of 2025, the share of sports events in trading volume reached about 70%. Authorities reminded that in Kentucky, only licensed bookmakers operating under the supervision of the Kentucky Horse Racing and Gaming Corporation have the right to offer bets on the outcome of sports events.
"These multi-billion dollar corporations and their legal tricks do not stand up to any criticism. As one of the leaders of our state legislature aptly put it: 'If it looks like a duck and quacks like a duck...'", said Attorney General Coleman.
On July 15, the Wagering Consumer Protection Act comes into effect in Kentucky, which will prohibit licensed sports betting operators from cooperating with the platforms named in the lawsuits.
Jurisdictional Conflict
Representatives of Polymarket stated that the actions of Kentucky authorities contradict the established system of regulating prediction markets by the U.S. Commodity Futures Trading Commission (CFTC). In turn, Kalshi insists that oversight of federally regulated exchanges should remain with the CFTC, not the states.
On April 2, the regulator itself filed lawsuits against Arizona, Connecticut, and Illinois, asserting exclusive jurisdiction over such contracts. On June 10, the CFTC released for public comment a draft of new rules proposing to review event outcome contracts for links to gambling activities, war, and terrorism, as well as assess their compliance with the public interest.
However, on June 17, a federal judge in Michigan denied Polymarket's motion against state-level regulation of the platform, ruling that the platform's sports contracts are not swaps and do not fall under the CFTC's federal jurisdiction. In April, the U.S. Court of Appeals for the Third Circuit, conversely, supported Kalshi in its dispute with New Jersey, deciding that local regulators cannot block sports betting during the proceedings.
Federal Threat
On June 16, a coalition of the American Gaming Association, the Indian Gaming Association, and two labor unions asked the Senate to include a provision in the CLARITY Act that would remove sports betting from the CFTC's purview and prohibit it through prediction market platforms. In March, Senators Adam Schiff and John Curtis prepared the Prediction Markets Are Gambling Act, aimed at a complete federal ban on sports and casino contracts.
As a reminder, Polymarket returned to the U.S. market on November 13, 2025, in beta mode after settling a dispute with the CFTC and paying a $1.4 million fine.
Analytical Conclusion: The situation surrounding Polymarket and Kalshi demonstrates a fundamental conflict between federal and state regulation in the U.S. While the CFTC attempts to assert control over prediction markets, states like Kentucky are launching preemptive strikes, viewing these platforms as disguised bookmaking operations. Given that Kalshi's sports contract volume exceeds $20 billion and the political wind in Washington is blowing toward stricter measures, prediction markets could face serious restrictions in the coming months. This is not just a legal battle — it is an existential challenge for the entire industry.