CFTC Challenges Kentucky Over Prediction Market Crackdown

The U.S. Commodity Futures Trading Commission (CFTC) has filed a federal lawsuit against Kentucky after the state moved to take legal action against several prediction market operators, escalating a growing dispute over who has authority to regulate event-based contracts.

The lawsuit names Kentucky Governor Andrew Beshear, Attorney General Russell Coleman, and the Kentucky Horse Racing and Gaming Corporation. The CFTC is seeking court orders to block Kentucky’s case, arguing that prediction markets fall under federal commodities law rather than state gambling regulations.

Kentucky Targets Polymarket and Kalshi

Last week, Kentucky sued Polymarket and Kalshi, along with Kalshi partners Coinbase, Robinhood, and Webull. State officials claim the companies are operating without a Kentucky gaming license and that sports related event contracts qualify as sports wagering under state law.US President Donald Trump aid:

Kentucky also argues that the platforms provide limited resources for users who may develop gambling-related problems.

Federal Authority at Center of Dispute

The CFTC maintains that Kalshi and Polymarket operate as designated contract markets under its supervision and that their event contracts are regulated swaps. The agency also criticized Kentucky’s new 14.25% excise tax on prediction market transaction fees, arguing it could make the businesses economically unviable.

CFTC Chair Mike Selig said Kentucky is the ninth state the agency has challenged while defending what it describes as its exclusive jurisdiction over federally regulated prediction markets.