The Commodity Futures Trading Commission (CFTC) has taken Kentucky to federal court, accusing the state of overstepping its authority in a growing dispute over prediction markets and event-based contracts.
A lawsuit filed June 23 in the U.S. District Court for the Eastern District of Kentucky asks a judge to declare that state gambling laws cannot be applied to event contracts traded on exchanges regulated by the CFTC. The agency is also seeking a permanent injunction that would prevent Kentucky officials from enforcing those laws against federally supervised markets.
According to the complaint, Kentucky began state court actions on June 17 against entities tied to Kalshi, Polymarket, Robinhood, Coinbase and Webull. State officials contend those companies were offering or facilitating sports gambling without authorization and are seeking penalties, damages, restitution and restrictions on future operations unless the firms obtain Kentucky sports wagering licenses.
CFTC challenges Kentucky state measures
The CFTC argues the contracts at issue are federally regulated swaps traded on designated contract markets and therefore fall under the Commodity Exchange Act rather than state gambling statutes.
“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” said Chairman Michael S. Selig in a press release.
“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. As I’ve consistently pledged, the CFTC is firmly committed to maintaining its exclusive jurisdiction over prediction markets, and today’s lawsuit against Kentucky is yet another example of the Commission protecting its federal interests.”
The agency says Kentucky’s effort extends beyond litigation. It points to House Bill 757, enacted in April after lawmakers overrode Gov. Andy Beshear’s veto. The measure increased Kentucky’s legal betting age from 18 to 21 and introduced new restrictions affecting prediction market operators. The law also imposed a 14.25% excise tax that the CFTC says would make continued operation in the state economically difficult.
The complaint further challenges provisions limiting business relationships between licensed sports betting operators and companies connected to prediction markets. Regulators argue those measures were crafted to discourage federally regulated exchanges from serving Kentucky residents.
Kentucky’s actions arrived after other state-level challenges involving prediction markets. We previously reported that Kentucky lawsuits targeted companies including VGW, Kalshi and Polymarket as regulators intensified scrutiny of emerging event-contract platforms.
The federal agency maintains that Congress established a comprehensive national framework for futures, options and swaps markets and granted the CFTC exclusive jurisdiction over those products. Allowing states to impose separate gambling rules, the complaint argues, would create conflicting obligations for exchanges required to provide impartial nationwide access.
The Kentucky case is part of a general campaign by the CFTC. The agency has already launched similar legal actions against Minnesota, Illinois and Rhode Island. ReadWrite also reported on a related lawsuit against Wisconsin.
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