Kalshi and Polymarket rack up another state suitor as Kentucky says the duck must quack louder 🦆

Kentucky Attorney General Russell Coleman filed state-court lawsuits Wednesday against prediction market operators Polymarket and Kalshi, along with Kalshi partners Coinbase, Robinhood and Webull, accusing them of running "unlicensed and illegal sports betting and gambling platforms." The action adds Kentucky to a wave of state-level legal fights that now spans at least 17 jurisdictions.

In a statement, Coleman said "Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws," adding that "these multi-billion dollar corporations and their legal fictions don't pass the sniff test." Quoting a state legislative leader, he said: "If it looks like a duck and quacks like a duck…" The complaints allege the platforms are "doing business without a Kentucky gaming license or following state regulations" and that their sports-linked event contracts "fall squarely within the definition of 'sports wagering' under Kentucky law." Kentucky also said the platforms offer users "few or no resources" to identify or seek help with problem gambling, as state law requires.

Kalshi and Polymarket have argued that their sports contracts are swaps regulated by federal commodities law, not state gambling regimes. That position is backed by the U.S. Commodity Futures Trading Commission, which has sued eight states that moved against prediction markets. A Polymarket spokesperson told Cointelegraph Kentucky's action "runs counter to the CFTC's established framework for regulating prediction markets. We look forward to addressing these claims through the appropriate legal process." Kalshi spokesperson Jacki McGavick said "Kalshi is a federally regulated exchange — the CFTC is our regulator, not the states. Courts have already recognized this, and we're confident they will here too." The CFTC did not immediately respond to a request for comment.

The dispute comes as prediction market trading volumes continue to climb. Kalshi and Polymarket together recorded $25 billion in monthly trading volume in May, according to Token Terminal. Kentucky previously drew a coalition of prediction market platforms into court after they sued the state on Friday to challenge its first-in-the-country 14.25% tax on prediction market transaction fees, calling it discriminatory and beyond state authority.

Kentucky's filing follows enforcement actions by Montana, Nevada, Utah, Iowa, Illinois and other states, all of which have argued that event contracts tied to sports are sports betting requiring state-level licensure. With multiple cases now pending across the country, prediction market operators and their state adversaries are moving closer to a potential Supreme Court test of how event contracts are classified under federal law.