Key Points
- Kentucky’s Attorney General Russell Coleman initiated legal action against prediction platforms Kalshi and Polymarket for allegedly operating without proper sports betting licenses
- Coinbase, Robinhood, and Webull are included in the complaint for allegedly failing to offer mandatory gambling addiction support resources
- More than 18 states have now launched legal challenges targeting prediction market operators
- The Commodity Futures Trading Commission has filed countersuits against eight states, maintaining that federal authority supersedes state regulation
- Courts remain divided on the issue, with a Michigan federal judge ruling against Polymarket while other jurisdictions have favored the platforms
This week, Kentucky’s Attorney General Russell Coleman brought legal proceedings in state court targeting the prediction market operators Kalshi and Polymarket. The complaints allege both entities are conducting unauthorized sports gambling activities within Kentucky’s borders.
The legal documents additionally identify Coinbase, Robinhood, and Webullācompanies partnering with Kalshi. According to Kentucky officials, these firms neglected to supply mandated support resources for individuals struggling with gambling addiction as required by state regulations.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman declared in an official statement.
Combined, Kalshi and Polymarket generated $25 billion in monthly trading activity during May, per Token Terminal data. Exclusion from significant U.S. markets could substantially impact their expansion trajectory.
Both Kalshi and Polymarket maintain they function as federally sanctioned exchanges. They contend their event-based contracts qualify as swaps under federal commodities regulations rather than sports wagers subject to state oversight.
“Kalshi is a federally regulated exchange ā the CFTC is our regulator, not the states,” a company representative stated.
Republican-Led State Contradicts Trump Administration Stance
The legal action places Kentucky in a politically complicated situation. The state delivered 64% support for President Donald Trump during the 2024 election. However, this lawsuit directly opposes Trump’s publicly stated position regarding prediction market oversight.
Trump has expressed on Truth Social that the CFTC should maintain sole regulatory authority over prediction markets. He has criticized state-level enforcement efforts using harsh language and expressed support for CFTC Chairman Mike Selig.
The CFTC has initiated legal action against eight states that have challenged prediction market platforms, asserting these states are exceeding their jurisdictional boundaries. Kentucky may soon join that list.
Coleman, who belongs to the Republican party and previously served as a U.S. attorney under Trump’s appointment, continues moving forward with the case despite potential political friction.
Polymarket responded that Kentucky’s legal move “runs counter to the CFTC’s established framework.” The platform expressed readiness to defend itself through appropriate legal channels.
Judicial Inconsistency Emerges Across Multiple Cases
Judicial outcomes have varied considerably across different jurisdictions. Coincidentally, on the identical day Kentucky launched its lawsuit, a federal judge in Michigan delivered an unfavorable ruling for Polymarket, determining that its sports-related event contracts fall outside federal commodities law protections.
Conversely, the Third Circuit Court of Appeals decided in April that New Jersey lacked authority to prohibit Kalshi from providing sports event contracts to state residents.
At minimum, 17 additional states have initiated legal proceedings against prediction market companies. Legal experts anticipate the controversy will ultimately require resolution by the U.S. Supreme Court.
Both Kalshi and Polymarket had previously filed their own lawsuit against Kentucky challenging the state’s 14.25% levy on prediction market transaction fees, characterizing it as unfairly discriminatory.
Notably, Donald Trump Jr., the president’s son, serves on Polymarket’s advisory board and maintains an advisory relationship with Kalshi.
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