Kentucky joins wave of lawsuits against Polymarket and Kalshi: betting disguised as "prediction markets"
On June 17, Kentucky Attorney General Russell Coleman filed lawsuits against two of the largest prediction market platforms — Polymarket and Kalshi. State authorities allege that these services are effectively providing unlicensed sports betting to residents, disguising it as legal derivatives.
The lawsuits were filed in the Franklin Circuit Court. In the documents, both platforms are referred to as "illegal bookmaking operations." According to the attorney general's office, the services operate without the appropriate license and do not offer users mandatory tools for identifying gambling addiction, which directly violates state law.
Coleman specifically emphasized that the platforms allow bets on match winners and individual player statistics. "This is ordinary betting, just under a different name," he stated. According to the lawsuit, Kalshi's contract volume reached nearly $23 billion last year, of which 89% were related to sports. In 2025, this share was about 70%.
Notably, on July 15, The Wagering Consumer Protection Act comes into effect in Kentucky, which will directly prohibit licensed sports betting operators from cooperating with these platforms. This makes the current lawsuits part of the state's broader strategy to combat unregulated prediction markets.
Representatives of Polymarket have already stated that the authorities' actions contradict the jurisdiction of the U.S. Commodity Futures Trading Commission (CFTC), which regulates such contracts at the federal level. Kalshi, in turn, insists that oversight of federally regulated exchanges should remain with the CFTC, not the states. However, on June 17, a federal judge in Michigan dismissed Polymarket's motion against state-level regulation, ruling that the platform's sports contracts are not swaps and do not fall under federal jurisdiction.
The situation is compounded by the fact that on June 16, a coalition of the American Gaming Association, the Indian Gaming Association, and two labor unions appealed to the Senate to include a provision in the CLARITY Act that would remove sports betting from CFTC oversight. And in March, Senators Adam Schiff and John Curtis introduced the Prediction Markets Are Gambling Act, which would ban such contracts at the federal level.
Expert commentary: Kentucky becomes the latest state to enter open confrontation with prediction markets. However, the key question remains unresolved: who will ultimately determine what constitutes a "bet" and what constitutes a "derivative"? If federal courts continue to support the CFTC's position, states will either have to adapt or initiate large-scale legislative changes. In any case, Polymarket and Kalshi find themselves at the epicenter of a legal storm that could fundamentally reshape the landscape of this sector for years to come.