The Commodity Futures Trading Commission filed suit against Kentucky on Tuesday to block the state from enforcing its gambling and tax laws against federally regulated prediction market platforms, marking the first time the agency has taken legal action against a state with a Republican attorney general under the Trump administration.
The lawsuit follows Kentucky Attorney General Russell Coleman, a Republican, suing prediction market platforms Kalshi and Polymarket last week, accusing the companies of operating illegal sportsbooks in violation of state law. Kentucky also enacted an excise tax earlier this year that would require prediction market operators to pay the state 14.25% of all transaction fees on a monthly basis beginning Jan. 1, 2027, according to Front Office Sports.
"Kentucky is the latest state attempting to shut down federally-regulated event contracts," CFTC Chairman Michael Selig said in a statement. "Prediction markets provide Kentuckians with valuable information about the likelihood of future events and offer risk management products relied on by Kentucky businesses and individuals."
The CFTC argued that Kentucky's civil enforcement actions and the new excise tax obstruct Congress's decision to vest the agency with exclusive authority over designated contract markets under the Commodity Exchange Act. The complaint names as defendants the Commonwealth of Kentucky, Democratic Governor Andy Beshear, Coleman, Kentucky Department of Revenue Commissioner Thomas Miller, and the Kentucky Racing and Gaming Corporation.
Since April 2, the CFTC has now brought suits against a total of nine states, according to CNBC. The eight states targeted before Kentucky were Arizona, Connecticut, Illinois, New York, Wisconsin, Minnesota, Rhode Island, and New Mexico. In all, 20 states are engaged in litigation over prediction markets, according to CNBC.
All of the CFTC's previous eight lawsuits targeted states whose attorneys general were Democrats, making the Kentucky action a departure from that pattern. Kentucky presents a split scenario — Governor Beshear is a Democrat while Attorney General Coleman is a Republican — a combination that draws the dispute into less partisan territory than earlier cases, according to The Hill.
The CFTC moved against Rhode Island in May after that state's attorney general sued Kalshi and Polymarket for alleged violations of state sports-betting statutes, and the agency has pursued a similar pattern — filing suit shortly after a state takes enforcement action against the platforms. At the core of the dispute is a disagreement over classification: states view sports-related event contracts as akin to sports betting and assert regulatory authority over them, while the CFTC maintains the contracts are swaps that belong exclusively under federal jurisdiction.
President Donald Trump weighed in last month, describing exclusive CFTC authority over prediction markets as "critically important."