Kentucky has filed lawsuits against Kalshi, Polymarket, and related entities, accusing them of operating unlicensed, illegal sports betting and gambling platforms in the state.
According to a Wednesday statement, the state's Attorney General Russell Coleman filed three separate lawsuits — one against Kalshi and affiliates, including Coinbase, another against Polymarket and affiliates, and a third against online casino platform VGW.
"Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws," said Coleman. "These multi-billion dollar corporations and their legal fictions don't pass the sniff test."
The statement argued that prediction market platforms bypass state consumer protection and tax requirements under gambling laws, and continue to operate without a Kentucky gaming license.
The state took issue with the platforms' offering of sports-related event contracts, saying that 89% of Kalshi's $23 billion contract volume came from sports wagering. It also said Polymarket spreads "false and misleading" advertisements that it is allowed to offer sports betting in Kentucky.
"[Polymarket] offers many of the same traditional sports bets that a licensed sportsbook would, including money lines, spreads, point totals, parlays and prop bets," the statement said. "Simply calling them 'sports event contracts' doesn’t make them legal."
Coinbase was included in the lawsuit as it split fees with Kalshi on bets made through the crypto exchange, according to the statement. Robinhood and Webull were also mentioned in the statement as affiliated entities of Polymarket.
The Block has reached out to Polymarket and Kalshi for comment.
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Kentucky's latest action extends the jurisdictional dispute between state regulators and the Commodity Futures Trading Commission over prediction markets.
More than a dozen states claimed that sports-related prediction markets violate state gaming and gambling laws. The CFTC has insisted that it holds exclusive federal jurisdiction over licensed platforms under the Commodity Exchange Act, which preempts state-level gambling laws. The agency also sued multiple states over their attempts to restrict prediction market platforms.
Last week, the CFTC proposed new rules that would reinforce support for sports-related bets on prediction markets, while limiting those linked to terrorism, assassinations, and war.
"The Commission observes that prediction markets have successfully listed for trading a wide variety of event contracts based on sports activities," the agency said in its proposed rule. "The Commission preliminarily finds that certain characteristics of event contracts involving sports activities would reduce the basis for finding that the event contracts are contrary to the public interest."
Meanwhile, state regulators are not the only forces pushing back against sports prediction markets. U.S. gaming industry groups have reportedly sent a letter to the Senate, urging lawmakers to include language in the Clarity Act banning sports event contracts.
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