Kentucky lawsuit targets prediction markets in U.S. sports betting dispute

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Kentucky lawsuit on prediction markets

Highlights

Kentucky Attorney General Russell Coleman sued Kalshi and Polymarket, alleging they operate illegal sportsbooks without state licenses and lack required responsible gaming resources.
The Kentucky case highlights rising tension between state regulators and federal agencies like the CFTC, which insists on exclusive federal jurisdiction over prediction markets and is suing eight states.
A federal judge denied Polymarket U.S. a bid to block Michigan's lawsuit, as multiple courts address the legality of prediction markets and stakeholders expect a potential U.S. Supreme Court decision.

Kentucky expands legal challenge against platforms

As reported by CoinDesk, Kentucky Attorney General Russell Coleman is suing Kalshi and Polymarket, accusing the companies of operating illegal sportsbooks in the state without the required licenses.

Kentucky says the firms are offering sports betting products outside the state's gaming framework. In a Wednesday statement, the state also says the companies and their partners, including Coinbase, Robinhood and Webull, do not provide resources for people with gambling problems as required under local law.

Coleman, a Republican and former U.S. attorney nominated by Trump, says Kalshi and Polymarket are breaking Kentucky law. The case adds the state to a growing list of jurisdictions challenging the expansion of prediction markets into sports-related contracts.

Federal-state clash deepens across the sector

The Kentucky action adds a political twist because Trump and Commodity Futures Trading Commission Chairman Mike Selig are backing federal control over prediction markets. Selig is arguing that event contracts fall under the CFTC's exclusive authority over U.S. derivatives, and the agency is already suing eight states, most recently New Mexico, while also intervening in other court disputes involving the industry.

Trump recently endorsed that position on Truth Social, saying it is critical to preserve the CFTC's exclusive authority over prediction markets and allow the industry to thrive. Even so, the federal stance is facing opposition from figures including former Trump chief of staff Mick Mulvaney, whose group Gambling Is Not Investing argues the products are an improper way around state gambling laws.

Former Securities and Exchange Commission and CFTC Chairman Gary Gensler has also recently filed a brief with the Sixth Circuit Court of Appeals arguing that Kalshi's sports betting activity violates state gaming regulations. Earlier on Wednesday, a federal judge denied Polymarket U.S. in its bid to block Michigan from suing the platform, underscoring how quickly the litigation is spreading as the industry presses its defense and courts move toward what many expect will eventually become a U.S. Supreme Court fight.

Our earlier coverage of Robinhood (HOOD) focused on the company’s sharp rally alongside a restructuring that included cutting about 10% of its workforce, as trading activity rebounded. We noted that record volumes across stocks, options, and prediction markets, plus new product initiatives and insider share sales, were shaping sentiment, even as technical indicators flagged potentially overbought conditions and elevated volatility.

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