Kentucky has sued Kalshi, Polymarket, and linked entities over alleged unlicensed sports betting activity in the state. According to Coleman’s office, the cases target sports event contracts, fee-sharing deals, and access through financial and crypto firms. Coleman said the companies used prediction market labels while offering wagers Kentucky treats as gambling.
| WHAT YOU NEED TO KNOW |
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| 1Kentucky filed lawsuits against Kalshi, Polymarket, VGW, and related entities over alleged illegal sports betting. |
| 2The state said Kalshi and Polymarket offered sports event contracts without Kentucky gaming licenses. |
| 3Coinbase, Robinhood, and Webull appeared in the state's statement due to links with prediction market activity. |
| 4The lawsuits add to the growing dispute between state regulators and the CFTC over sports prediction markets. |
Kentucky Targets Prediction Market Operators
According to Coleman’s office, Kentucky filed three separate lawsuits on Wednesday against Kalshi, Polymarket, and VGW. The Kalshi complaint also names affiliates, including Coinbase, which partnered with the exchange on event contracts. The lawsuits seek court orders to block the alleged activity.
The state said Kalshi and Polymarket operate without Kentucky gaming licenses and avoid state gambling rules. Coleman’s office said those rules cover consumer protections, tax obligations, and licensing standards for sportsbook operators.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman said in the statement. Coleman added, “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test.” Kentucky said 89% of Kalshi’s $23 billion contract volume came from sports wagering. The statement said Coinbase split fees with Kalshi on bets placed through the crypto exchange.
Sports Contracts Draw State Scrutiny
The Polymarket lawsuit centers on products that Kentucky says resemble standard sportsbook bets. Coleman’s office cited money lines, spreads, point totals, parlays, and prop bets. The state also accused Polymarket of spreading “false and misleading” advertisements about its Kentucky operations. The statement said platform wording could not override state gambling law.
“Simply calling them ‘sports event contracts’ doesn’t make them legal,” Coleman’s office said. The statement also named Robinhood and Webull as affiliated entities connected to Polymarket activity. Kentucky argued that prediction markets bypass licensing systems that legal sportsbooks must follow. It said the platforms compete with licensed operators while avoiding state oversight and tax duties.
Federal And State Disputes Intensify
The lawsuits extend an active dispute between state gambling regulators and the Commodity Futures Trading Commission. More than a dozen states claim sports prediction markets violate state gaming and gambling laws. The CFTC has argued that it holds exclusive authority over licensed platforms under the Commodity Exchange Act. The agency says federal commodities law preempts state gambling enforcement against regulated event-contract markets.
Last week, the CFTC proposed rules that would support certain sports event contracts on prediction platforms. The proposal would still restrict contracts tied to terrorism, assassinations, and war. A U.S. District Court judge in western Michigan denied Polymarket’s request for a preliminary injunction on Wednesday. The ruling allowed Michigan regulators to restrict sports-related wagers offered through the platform.
The judge found that sports prediction markets do not qualify as “swaps” under the CFTC framework. Polymarket appealed the decision to the Sixth Circuit after the Michigan ruling. U.S. gaming industry groups reportedly asked Senate lawmakers to address sports event contracts in the Clarity Act. Their letter urged lawmakers to add language that would ban those contracts from U.S. prediction platforms.
