CFTC Swings Back at Kentucky Prediction Market Lawsuit

• The Commodity Futures Trading Commission has filed a lawsuit in Kentucky to preserve its regulatory jurisdiction over prediction markets
• The lawsuit is in response to the Kentucky Attorney General suing Kalshi and Polymarket to halt their sports event contract markets in the state
• The commission requests a permanent injunction prohibiting Kentucky from enforcing state gambling laws against prediction markets

The Commodity Futures Trading Commission has fired back with a lawsuit of its own after Kentucky Attorney General Russell Coleman sued Kalshi and Polymarket to halt their event contract markets in the Bluegrass State.

The Commodity Futures Trading Commission filed a lawsuit in U.S. District Court for the Eastern District of Kentucky against Coleman, Gov. Andrew Beshear (R), and the Kentucky Horse Racing and Gaming Corporation to put a halt to Coleman’s recently filed lawsuits against the two prediction market operators.

“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” CFTC Chairman Michael S. Selig said in a press release. “Prediction markets provide Kentuckians with valuable information about the likelihood of future events and offer risk management products relied on by Kentucky businesses and individuals. 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.”

In Response to Enforcement Actions

The CFTC filings assert its regulatory authority over all prediction markets in the U.S. The Commodity Exchange Act (CEA), the CFTC states, gives the commission exclusive authority to regulate prediction markets, not the states.

“Event contracts, including sports-related event contracts that are listed on DCMs, are covered by the CEA, and the CEA prohibits States from invading the CFTC’s exclusive jurisdiction over event contract transactions offered by and executed on federally regulated DCMs. By prohibiting these DCMs from operating in Kentucky without a Kentucky license or by conditioning their operation on compliance with preempted Kentucky laws and regulations, Defendants directly interfere with Plaintiffs’ authority pursuant to the federal scheme imposed by Congress through the CEA,” CFTC counsel wrote in the filing.

In its lawsuit, the CFTC requests the court issue a permanent injunction that prohibits the state from enforcing its gambling laws against CFTC-regulated prediction market operators.

The lawsuit is in direct response to Coleman’s own lawsuits against both Kalshi and Polymarket, alleging the prediction market companies are offering illegal sports betting and online gambling in the Bluegrass State.

Taking Aim at Prediction Markets

Coleman filed lawsuits in Franklin Circuit Court against prediction market operators Kalshi and Polymarket, plus a third lawsuit against VGW, an online casino platform operating Chumba Casino, Global Poker, and LuckyLand Slots.

All three lawsuits allege the companies run afoul of Kentucky’s Consumer Protection law, the Loss Recovery Act and the Commonwealth’s gambling laws

According to Coleman and the filed lawsuits, Kalshi and Polymarket are operating illegal sports betting in the state without a Kentucky gaming license or following state regulations. Coleman noted both Kalshi and Polymarket advertising in the state provides the “false and misleading impression that it is authorized to offer sports wagering under Kentucky law.”

Both Kalshi and Polymarket, he said, bypass Kentucky consumer protection and tax requirements mandated by the commonwealth’s gambling laws.

The attorney general noted in the lawsuits that Polymarket and Kalshi, plus its affiliated entities, Coinbase, Robinhood and Webull, offer users few or no resources to identify or seek help for a gambling problem, which is mandated under Kentucky law.

The lawsuits request temporary and permanent injunctive relief against Kalshi and Polymarket, while also granting Kentucky all recoverable measures of damages.