Kentucky Attorney General Targets Prediction Markets in New Lawsuits

Kentucky Attorney General Russell Coleman sued prediction markets Kalshi and Polymarket, as well as VGW, a firm that operates online casino-style games. 

The lawsuits accuse the companies of running unlicensed, illegal sports betting and gambling across the state.

What Kentucky Attorney General Alleges

Coleman alleges that the prediction market platforms allow users to wager on game winners, point spreads, and player statistics. He says they skip the consumer protections and taxes that state gambling laws require.

The complaint claims that sports betting accounted for roughly 70% of Kalshi’s trading volume during a 2025 sample period. In addition, of the nearly $23 billion in contract volume last year, 89% came from sports wagering.

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The action followed a coalition representing both platforms suing Kentucky, challenging its new tax and contracting restrictions.

“Kentucky’s attempt to impose a 14.25% excise tax whenever any Kentucky resident purchases an event contract anywhere in the country, and whenever any resident from any State purchases an event contract while physically present in Kentucky, plainly ‘concerns’ or ‘regards’ exchange-traded derivatives falling within the CFTC’s exclusive jurisdiction,” the document reads.

Platforms Point to Federal Regulations

Meanwhile, Kalshi pointed to its federal oversight in a statement shared with BeInCrypto.

“Kalshi is a federally regulated exchange. The CFTC is our regulator, not the states. Courts have already recognized this, and we’re confident they will here too,” Kalshi spokesperson, Jacki McGavick, mentioned.

Polymarket echoed that position in a statement to BeInCrypto.

“This action runs counter to the CFTC’s established framework for regulating prediction markets. We look forward to addressing these claims through the appropriate legal process,” a Polymarket spokesperson said.

A VGW spokesperson also stated that the firm plans to defend itself vigorously against the lawsuit.

“We respectfully reject the Kentucky Attorney General’s claims and plan to vigorously defend this lawsuit. We have lawfully operated in the US for more than a decade, delivering online Social Plus games to millions of Americans who value the freedom to enjoy the free, fun entertainment that this lawsuit effectively targets. With values including ‘our players come first’ and ‘we do what’s right’, we pride ourselves on creating not only the best games, player experiences and entertainment, but ensuring this is done safely and responsibly with robust consumer protections,” the spokesperson shared with BeInCrypto.

States that move against prediction markets have met resistance from the Commodity Futures Trading Commission (CFTC). The agency argues that it holds sole authority over event contracts. The CFTC has already sued several states, including Arizona and Minnesota.

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