Kentucky's Attorney General, Russell Coleman, has initiated three lawsuits against Kalshi, Polymarket, and VGW, alleging that these companies are running unlicensed sportsbooks within the state. Coleman claims that their operations violate Kentucky's gambling laws, the Consumer Protection Act, and the Loss Recovery Act.
In a statement, Coleman emphasized, "Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws." He further criticized these multi-billion dollar corporations, suggesting that their actions do not align with legal standards, quoting a state legislative leader: "If it looks like a duck and quacks like a duck..."
The lawsuits come on the heels of a recent suggestion from Jonathan Rabinowitz, chairman of the Kentucky Horse Racing and Gaming Corporation, indicating that the Attorney General would pursue enforcement actions against prediction market operators.
The complaints argue that the contracts offered by Kalshi and Polymarket for sports events qualify as sports wagering under Kentucky law, thus necessitating a license from the Kentucky Horse Racing and Gaming Commission. Despite not having this license, both companies are allegedly accepting bets from residents of Kentucky.
Additionally, the Kalshi lawsuit includes Coinbase Financial Markets, Robinhood Markets, Robinhood Derivatives, and Webull as defendants, claiming these companies collaborated with Kalshi to provide prediction-market products on their platforms.
According to the Attorney General's office, Kalshi reported nearly $23 billion in contract volume last year, with around 89% linked to sports markets. The state asserts that sports contracts accounted for approximately 70% of Kalshi's trading volume during a selected sampling period in 2025.
Coleman argues that operators of prediction markets are evading the consumer protections, licensing requirements, and tax obligations that regulated sportsbooks must adhere to.
The lawsuits come shortly after the Coalition for Fair Markets, which includes Kalshi, Crypto.com’s derivatives exchange, and Polymarket US, filed a lawsuit challenging Kentucky's newly implemented tax on prediction markets and associated restrictions.
This year, Kentucky enacted a law imposing a 14.25% tax on online prediction market revenue, along with a measure that prohibits licensed sportsbooks from collaborating with prediction market platforms starting July 15.
Coleman has also been vocal in the national discussion surrounding prediction markets. Earlier, he joined a coalition of 40 attorneys general and the District of Columbia in urging the CFTC to determine that sports-event contracts are not swaps and should remain under state gambling regulations.
The letter from the coalition argued that sports-event contracts are essentially the same as traditional sports betting and should be outside the CFTC's jurisdiction.
These lawsuits may serve as a significant test for the CFTC's approach to prediction markets, as the agency has intervened in disputes involving states seeking to limit sports-event contracts, asserting that federal law grants it exclusive authority over such markets.