TheBlock
Kentucky Attorney General Russell Coleman filed three separate lawsuits on Wednesday against Kalshi, Polymarket, and VGW, accusing the platforms of running unlicensed sports betting operations in the state. The action also names Coinbase, which splits fees with Kalshi on bets routed through the crypto exchange, plus Robinhood and Webull as Polymarket affiliates.
The complaint leans on a striking volume number: 89% of Kalshi's $23 billion in contract volume comes from sports wagering, according to the AG's office. Coleman framed the suit bluntly, calling Kalshi and Polymarket "illegal sportsbooks" and accusing the platforms of using "legal fictions" to bypass state consumer protection and tax rules. The third suit targets VGW, an online casino platform, on related illegal-gambling grounds.
Why it matters
The Kentucky action lands directly in the federal-state jurisdictional fight over prediction markets. The CFTC has insisted it holds exclusive jurisdiction over licensed event-contract platforms under the Commodity Exchange Act, and has even sued states that tried to restrict them. Kentucky's suits argue the opposite: that sports event contracts are effectively wagers and must clear state gaming law regardless of federal preemption. A U.S. District Court judge in Michigan reinforced that view on the same day, denying Polymarket's request for a preliminary injunction against state regulators and ruling that sports prediction markets do not qualify as CFTC-regulated "swaps." Polymarket has appealed to the Sixth Circuit.
The political pressure is building from another direction too: U.S. gaming industry groups have urged the Senate to use the Clarity Act to ban sports event contracts outright. Last week, the CFTC proposed new rules that would explicitly support sports-related event contracts while limiting contracts tied to terrorism, assassination, and war — a federal posture that now sits in direct tension with the state-level pushback Kentucky is escalating.
Market impact
For Kalshi and Polymarket, the legal exposure is no longer abstract.
Frequently asked questions
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Why is Kentucky suing Kalshi and Polymarket?
Attorney General Russell Coleman filed three suits accusing the platforms of running unlicensed sports betting in the state, citing 89% of Kalshi's $23 billion contract volume as sports wagers and calling the platforms "illegal sportsbooks."
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Why is Coinbase named in the Kentucky lawsuit?
The complaint says Coinbase splits fees with Kalshi on bets routed through the crypto exchange, pulling the US-listed venue directly into the gambling dispute alongside Robinhood and Webull, which were named as Polymarket affiliates.
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What did the Michigan court rule on Polymarket the same day?
A U.S. District Court judge in the Western District of Michigan denied Polymarket's request for a preliminary injunction against state regulators, ruling that sports prediction markets do not qualify as CFTC-regulated "swaps." Polymarket has appealed to the Sixth Circuit.
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Where does the CFTC stand in the federal-state fight?
The CFTC claims exclusive federal jurisdiction over licensed event-contract platforms under the Commodity Exchange Act and has even sued states that tried to restrict them. Last week it proposed new rules explicitly backing sports event contracts while limiting contracts tied to war and assassination.
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Could other states follow Kentucky's lead?
The Michigan ruling weakens the federal-preemption shield Kalshi and Polymarket have leaned on, and more than a dozen states have already flagged sports prediction markets as potential gaming-law violations — copycat AG actions are the next thing to watch.
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