Kentucky Sues Kalshi and Polymarket Over Illegal Betting
Kentucky says Kalshi and Polymarket offered sports betting without a license. The case adds more pressure to the fight between state rules and federal oversight claims.
Key Takeaways
- Kentucky is suing Kalshi, Polymarket, and VGW for offering sports betting and gambling without a license.
- According to the complaint, the platforms offer bets without the consumer protections and tax payments required by Kentucky law.
- The companies point to federal CFTC regulation and argue that states should not be able to regulate these markets.
Kentucky Attorney General Russell Coleman has filed lawsuits against prediction markets Kalshi and Polymarket, as well as VGW, a company that offers online casino games. The complaints involve the unlicensed offering of sports betting and gambling in the state.
Allegations of Illegal Sports Betting
According to Coleman, the platforms let users bet on game winners, point spreads, and player stats without the consumer protections and tax payments required under Kentucky gambling law. The complaint says sports betting made up about 70% of Kalshi’s trading volume during a sample period in 2025. In total, 89% of contract volume, nearly $23 billion last year, came from sports betting.
Federal Regulation vs. State Law
The platforms involved point to federal oversight. Kalshi says it is an exchange regulated by the Commodity Futures Trading Commission (CFTC) and that the CFTC has exclusive jurisdiction over these markets, not the states. Polymarket shares that view and says the lawsuit conflicts with the regulatory framework for prediction markets set by the CFTC. VGW says it will defend itself strongly and points to its long-running legal operations in the US with responsible consumer protections.
The CFTC has previously sued several states, including Arizona and Minnesota, to protect its exclusive authority over event contracts. This fits into a broader strategy to stop states from imposing their own rules on prediction markets, which the CFTC says could raise the risk of fraud and weaken consumer protection.
Relevance for the European and Dutch Market
Even though this legal fight is playing out in the United States, the clash between federal and state regulation could also matter for European and Dutch crypto and prediction markets. It highlights how complex it is to regulate cross-border financial products and how important clear jurisdiction and oversight are. European regulators may be able to learn from this about how national and supranational rules line up, especially as event-based financial platforms keep growing in popularity worldwide.
