The Commodity Futures Trading Commission initiated legal action against Kentucky on Tuesday, marking the first instance of a Republican-led state facing federal scrutiny over its efforts to restrict prediction market platforms.
The CFTC’s lawsuit follows Kentucky’s earlier suit against prediction market platforms Kalshi and Polymarket, which the state characterized as illegal gambling operations. Kentucky argues these platforms operate as unregulated sportsbooks through their sports-related event contracts.
“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” said CFTC Chair Michael Selig in a statement announcing the federal lawsuit. “As I’ve consistently pledged, the CFTC is firmly committed to maintaining its exclusive jurisdiction over prediction markets, and today’s lawsuit against Kentucky is yet another example of the Commission protecting its federal interests.”
This case represents the ninth state where the CFTC has filed suit in its ongoing effort to defend what it describes as exclusive federal oversight of prediction markets. The agency maintains that these contracts are swaps, which fall under its regulatory authority, while states contend they have the right to govern sports-related betting activities.
Kentucky Attorney General Russell Coleman previously stated that the platforms violate state law, telling reporters last week that “Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws” and adding, “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test.”
The legal battle involves 20 states total, with ongoing litigation against platforms like Kalshi and Polymarket. While most previous CFTC enforcement actions targeted states with Democratic attorneys general, Kentucky becomes the first Republican-led state to face similar federal legal challenges, despite bipartisan state-level restrictions on prediction markets.
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