Kentucky joins the attack on Polymarket and Kalshi: a new round of war with prediction markets
The legal front against prediction markets is expanding. On June 17, Kentucky Attorney General Russell Coleman filed lawsuits against two of the largest platforms — Kalshi and Polymarket. State authorities insist that these services, masquerading as innovative financial instruments, are in fact offering residents unlicensed sports betting.
The lawsuits were filed in Franklin County Circuit Court. In the documents, both platforms are directly called "illegal bookmaking operations." According to the prosecutor's office, they operate without the necessary license and, critically, do not provide users with legally required mechanisms for identifying gambling addiction and obtaining help.
The Attorney General particularly emphasizes that the platforms allow bets on match winners and individual player statistics. "This is ordinary betting, just under a different name," Coleman stated. One of the lawsuits cites figures: over the past year, Kalshi conducted contracts worth nearly $23 billion, of which 89% were related to sports. In a selected period of 2025, the share of sporting events was about 70%. It is noted that in Kentucky, only bookmakers with a license from the state's Horse Racing and Gaming Corporation can legally offer sports betting.
"These multi-billion dollar corporations and their legal tricks do not withstand 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...'" the prosecutor stated.
The situation is compounded by the fact that on July 15, The Wagering Consumer Protection Act comes into effect in Kentucky, which will directly prohibit licensed sports betting operators from cooperating with the platforms named in the lawsuits.
Polymarket has already stated that the state's actions contradict the established system of regulating prediction markets by the U.S. Commodity Futures Trading Commission (CFTC). Kalshi, for its part, insists that oversight of federally regulated exchanges should remain exclusively with the CFTC, not the states.
This is not an isolated incident. On April 2, the CFTC itself filed lawsuits against Arizona, Connecticut, and Illinois, insisting on its exclusive jurisdiction. And on June 10, the regulator released a draft of new rules for public comment, proposing to review contracts for links to gambling activities, war, and terrorism, allowing 90 days for consideration.
Judicial practice is currently contradictory. On June 17, a federal judge in Michigan dismissed Polymarket's motion against state-level regulation, stating that the platform's sports contracts are not swaps and do not fall under CFTC jurisdiction. However, in April, the Third Circuit Court of Appeals supported Kalshi in its dispute with New Jersey, allowing local regulators to block bets only until the proceedings conclude.
Against this backdrop, on June 16, a coalition of gambling associations asked the Senate to include a provision in the CLARITY Act that would remove sports betting from CFTC oversight. And in March, Senators Schiff and Curtis introduced the Prediction Markets Are Gambling Act, which would federally ban sports and "casino-like" contracts.
My analysis: The attack on Polymarket and Kalshi by Kentucky is not just a local incident, but part of a systemic pressure. States see prediction markets as a threat to their tax revenues from legal gambling and are trying to seize the initiative from the federal regulator. While the CFTC tries to assert its jurisdiction, a precedent base is already being formed locally that could make prediction markets in the US virtually impossible without a radical change in their business model.