Kentucky Sues Kalshi and Polymarket Over Sports Bets

Kentucky filed suit this week against prediction-market platforms Kalshi and Polymarket, alleging the companies have offered sports-related wagering in the state without registering as gambling operators. The complaint was brought by Attorney General Russell Coleman and targets sports wagers listed on both platforms.

In a statement, Attorney General Russell Coleman wrote that Kalshi and Polymarket are “operating illegal sportsbooks in Kentucky and breaking our laws,” and added the companies’ legal structures do not withstand scrutiny.

Kalshi and Polymarket maintain that the contracts their customers buy are financial swaps and fall under the Commodity Futures Trading Commission’s federal oversight rather than state gambling rules. That interpretation is supported by the administration of President Donald Trump, which has directed the CFTC and the Justice Department to challenge state efforts to restrict the platforms.

Federal regulators have already sued several states over laws aimed at curbing prediction markets and have indicated they will pursue additional legal action where states attempt to impose their own rules. Kentucky’s complaint says the companies avoided state registration and did not meet requirements that licensed gambling operators must follow, including measures tied to gambling addiction and consumer protections.

The courts have issued mixed rulings so far. This week a federal judge in the Western District of Michigan denied Polymarket’s request for a preliminary injunction, ruling sports-related wagers do not qualify as swaps under CFTC authority and allowing Michigan regulators to press restrictions. Separately, federal cases in the Sixth Circuit have produced differing preliminary rulings: two district judges sided with state regulators and one sided with the prediction markets.

The litigation will require courts to interpret the Commodity Exchange Act and state gambling statutes to decide whether certain prediction-market contracts qualify as swaps or whether states can treat them as illegal sports betting within their borders. Several states have filed similar complaints asserting the platforms operate as unlicensed sportsbooks and have not met statutory obligations.

The suits remain active and are likely to produce additional filings and appeals as regulators and the companies press their legal positions.