The U.S. Commodity Futures Trading Commission filed suit against Kentucky on Tuesday, seeking to stop the state’s recent legal action targeting prediction market platforms.
Filed in federal court, the CFTC’s complaint asks for declaratory and injunctive relief to block a Kentucky suit that named five prediction markets and was filed last week. The federal case names Governor Andy Beshear, Attorney General Russell Coleman and the Kentucky Horse Racing and Gaming Corporation among the defendants.
CFTC Chair Mike Selig said the agency is protecting its exclusive federal jurisdiction over event contracts, calling Kentucky the latest state attempting to shut down federally regulated prediction markets. The commission has intensified enforcement and litigation over state efforts to regulate prediction markets since Selig became chair in December; Kentucky is the ninth state the CFTC has sued in such disputes.
Kentucky’s suit had targeted Polymarket and Kalshi, and—because Kalshi partners with them—Coinbase, Robinhood and Webull. The state alleges those platforms operate without a Kentucky gaming license, that their event contracts amount to “sports wagering” under state law, and that the platforms fail to provide statutorily required resources for problem gambling prevention and assistance. Sports betting in Kentucky has been under the oversight of the Kentucky Horse Racing and Gaming Corporation since 2023.
In response, the CFTC asserts that Polymarket and Kalshi are designated contract markets within its regulatory framework and that the event contracts they list qualify as “swaps” under federal commodities law. The agency also says Coinbase, Robinhood and Webull are registered futures commission merchants (FCMs) and are permitted to offer event contracts in partnership with a designated contract market.
The federal complaint also challenges a recent Kentucky law imposing a 14.25% excise tax on prediction-market transaction fees, arguing the levy is effectively designed to make operations economically unviable in the state. “This tax essentially makes it impossible for prediction markets to operate in Kentucky,” the CFTC contends.
The CFTC’s suit follows a similar filing in New Mexico seeking to block that state’s attempt to apply gaming laws to Kalshi. The matter has drawn political attention: earlier this year former President Donald Trump publicly expressed support for the CFTC as the proper regulator of prediction markets, and Donald Trump Jr. has disclosed investments in and advisory roles connected to Polymarket and Kalshi.
The federal case frames the dispute as one over regulatory preemption and the CFTC’s exclusive authority over certain event contracts. How the courts resolve the competing state and federal claims will affect where and how prediction markets can operate in the U.S., and whether states can use licensing, taxation and gaming statutes to regulate or block those platforms.