The Commodity Futures Trading Commission filed a complaint against Kentucky on June 23. The suit asks a federal court to bar the state from enforcing gambling laws and a new tax against federally regulated prediction markets. It is the ninth such suit the agency has brought since April and the first to target a state led by a Republican attorney general. Kentucky enacted a 14.25% excise tax on prediction-market transaction fees in April, set to take effect January 1, 2027. The CFTC calls the levy a barrier designed to make platforms impossible to operate in the state—the first tax of its kind in the US.
Kentucky AG Coleman Sued Kalshi and Polymarket on June 17
Kentucky breaks a pattern: every prior CFTC suit hit a state with a Democratic attorney general. Governor Andy Beshear is a Democrat, but Republican Attorney General Russell Coleman is the official who sued Kalshi and Polymarket on June 17, alleging the platforms run unlicensed sportsbooks. That suit also named Kalshi's partners Coinbase, Robinhood and Webull as affiliates. Coleman vowed his office would defend the state's betting laws against "out-of-state companies." The platforms have removed his suits to federal court.
A coalition backing Kalshi, Polymarket and Crypto.com had already sued over the 14.25% excise tax on June 12. The tax is due to take effect January 1, 2027. The CFTC's June 23 complaint also targets the levy, calling it a barrier designed to make the platforms "impossible" to operate in Kentucky.
CFTC Argues Exclusive Federal Jurisdiction Over Prediction Markets
The CFTC's legal argument is the one it has used all year: sports-event contracts are swaps under the Commodity Exchange Act, placing them under exclusive federal jurisdiction and preempting state gambling law. "Kentucky is the latest state attempting to shut down federally-regulated event contracts," CFTC Chair Michael Selig said, pledging to defend the agency's "exclusive jurisdiction over prediction markets." The complaint asks for declaratory and injunctive relief to block Kentucky from enforcing its gambling laws and the new tax against the platforms.
Roughly 20 States Now in Active Litigation Over Prediction Markets
Roughly 20 states are now in active litigation over prediction markets. In Nevada, the state is trying to fine Kalshi $120,000 a day. Former CFTC and SEC chair Gary Gensler has filed an appeals-court brief arguing sports contracts fall outside the agency's swap rules. A Supreme Court case is widely expected as soon as next year. The platforms are betting on a friendlier venue in federal court—the same playbook unfolding in Nevada and other states.
FAQ
What did the CFTC do on June 23?
The CFTC filed a complaint for declaratory and injunctive relief against Kentucky on June 23, asking a federal court to bar the state from enforcing its gambling laws and a 14.25% excise tax against federally regulated prediction markets.
Why is the Kentucky lawsuit significant?
Kentucky is the first state with a Republican attorney general that the CFTC has sued over prediction markets. The nine prior suits since April all targeted states with Democratic attorneys general. Kentucky Attorney General Russell Coleman sued Kalshi and Polymarket on June 17, alleging they run unlicensed sportsbooks.
What is the 14.25% tax Kentucky enacted?
Kentucky enacted a 14.25% excise tax on prediction-market transaction fees in April, set to take effect January 1, 2027. The CFTC calls it a barrier designed to make platforms impossible to operate in the state—the first tax of its kind in the US. A coalition backing Kalshi, Polymarket and Crypto.com sued over the levy on June 12.
