US CFTC Sues Kentucky Over Prediction Market Lawsuit
Quick Look
- The US CFTC has sued Kentucky to block the state's action against prediction markets, arguing federal jurisdiction.
- Kentucky had accused Polymarket and Kalshi of operating illegal gambling platforms.
AI-generated summary
Why It Matters
The US CFTC is suing Kentucky to prevent the state from enforcing its gaming laws against prediction market operators, asserting federal authority over these platforms.
The US Commodity Futures Trading Commission filed a lawsuit against Kentucky on Tuesday after the state sued prediction market operators last week, accusing them of operating unlicensed and illegal gambling platforms.
The lawsuit, filed in federal court, seeks to block Kentucky’s legal action against five prediction markets filed on Wednesday last week, calling for declaratory and injunctive relief. It names Kentucky Governor Andrew Beshear, Attorney General Russell Coleman and the Kentucky Horse Racing and Gaming Corporation, among others.
“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” CFTC Chair Mike Selig said in a statement. “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.”
The CFTC has been ramping up its effort to maintain authority over prediction markets since Selig was appointed as chair in December. Kentucky is now the ninth state that the CFTC has sued over state authorities taking action against prediction markets.
Kentucky sued Polymarket and Kalshi, along with Kalshi partners Coinbase, Robinhood and Webull, claiming they are “doing business without a Kentucky gaming license or following state regulations” and that their sports event contracts “fall squarely within the definition of ‘sports wagering’ under Kentucky law.”
Sports betting has been under the jurisdiction of the Kentucky Horse Racing and Gaming Corporation since 2023.
The state also alleged the platforms offer users “few or no resources” to identify or seek help for a gambling problem as required by state law.
In its lawsuit, the CFTC argued that Kalshi and Polymarket are designated contract markets under its authority, and their event contracts are “swaps” under federal commodities law.
It argued that Coinbase, Robinhood and Webull are CFTC-registered futures commission merchants that can offer event contracts in partnership with a designated contract market.
The regulator also took aim at Kentucky’s recent law that imposed a 14.25% excise tax on prediction market transaction fees, arguing it was an attempt to make prediction markets economically unviable in the state.
“This tax essentially makes it impossible for prediction markets to operate in Kentucky,” the CFTC argued.
The lawsuit comes just weeks after CFTC similarly sued New Mexico to block the state’s efforts to apply state gaming laws to Kalshi.
In May, US President Donald Trump gave the CFTC moral support, saying it was “critically important” that the regulator was the authority on prediction markets.
Trump’s son, Donald Trump Jr., has invested in and is on the advisory board for Polymarket and is an adviser to Kalshi.
What to Watch
AI outlook — possibilities, not facts
Federal courts will likely rule in favor of the CFTC's jurisdiction over prediction markets.
Likely · Within months
Open Questions
- Will other states challenge CFTC jurisdiction?
- How will courts rule on federal vs. state authority?
- Will prediction markets adapt to state regulations?
