CFTC Sues Kentucky Over Prediction Market Dispute

This past Tuesday, the Commodity Futures Trading Commission said that it was filing a lawsuit against the state of Kentucky, according to CNBC. 

This comes after Kentucky filed a lawsuit against top prediction market platforms Kalshi and Polymarket, saying that they were illegal gambling platforms operating in the state. 

In suing Kentucky, this is the ninth state the CFTC has sued to protect the stance that it has exclusive jurisdiction over regulating prediction markets. 

“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” said CFTC Chair Michael Selig via a press release put out by the Commission announcing the lawsuit. “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.”

Kentucky Becomes the Ninth State Sued

Thus far, among the nine states, Kentucky is the first to have a Republican attorney general. The other states that have been sued include Arizona, New Mexico, Minnesota, Illinois, Wisconsin, New York, Rhode Island, and Connecticut. 

CNBC also notes that Utah and Kalshi "agreed to a motion to stay as the two parties have engaged in discussion regarding issues raised in Kalshi's lawsuit against the state."

Thus far, 20 states have taken legal action against prediction markets. 

Federal and State Officials Continue to Clash

On one side, the states argue they have a right to regulate them because of sports-related contracts, whereas the CFTC argues that these are contract swaps that fall under its jurisdiction. 

“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” said Russell Coleman, Kentucky Attorney General, via a press release last week announcing the suit against the two firms.

“These multi-billion dollar corporations and their legal fictions don’t pass the sniff test,” he said. “As one of our state legislative leaders said it best, ’If it looks like a duck and quacks like a duck …”