CFTC Sues Kentucky to Protect Kalshi as Republican AG Targets Sports Betting

Published by James Harris on June 24, 2026June 24, 2026

The CFTC sued Kentucky on June 23, filing a one-count complaint against the state’s governor, attorney general, revenue commissioner, and gaming corporation to block enforcement actions against Kalshi and Polymarket. Kentucky becomes the ninth state the CFTC has sued in this campaign, but it is the first to feature a Republican attorney general as a named defendant.

Attorney General Russell Coleman filed separate lawsuits against both platforms on June 17, accusing them of running unlicensed sportsbooks under Kentucky gambling law. His complaint against Kalshi claimed 89% of the platform’s $23 billion in 2025 contract volume came from sports wagering, a framing that directly challenges the “event contracts” classification Kalshi uses to argue it sits under CFTC jurisdiction rather than state gambling law. The federal response came six days later. Coleman’s suit also named Coinbase, Robinhood, and Webull as affiliated defendants, which raises the stakes considerably: dragging major retail brokerage platforms into state gambling enforcement is a different kind of pressure than suing the prediction markets themselves.

The circuit math is now working against the platforms in at least one jurisdiction. A federal judge in Michigan’s Western District denied Polymarket a preliminary injunction last week, ruling that sports prediction markets fall outside CFTC exclusive jurisdiction. Polymarket has appealed to the Sixth Circuit, which also covers Kentucky.

That appeal is where this gets structurally significant. Two Sixth Circuit district judges have now sided with state regulators, one has sided with the platforms, and the Third Circuit sided with Kalshi in New Jersey earlier this year. The pattern across jurisdictions is consistent: when prediction market operators decline to seek local licensing, regulators default to gambling classifications, and courts have shown no uniform instinct to defer to federal preemption arguments. The CFTC’s stated strategy is to force a Supreme Court ruling, which legal observers expect within 12 to 18 months. Kentucky also enacted a 14.25% excise tax on prediction-market transaction fees under House Bill 904, set to take effect January 1, 2027, and the CFTC’s complaint addresses that tax directly as falling within its exclusive jurisdiction under the Commodity Exchange Act.

The Coalition for Fair Markets, representing Kalshi, Crypto.com, and Polymarket, filed its own lawsuit against Kentucky’s attorney general on June 12 targeting the tax. Both Kalshi and Polymarket have already removed the Kentucky state court cases to federal court. If Kentucky moves to remand them, the procedural fight Coleman has signaled he wants will sharpen the venue question that the Sixth Circuit appeal will eventually have to answer anyway, and platforms operating in similar regulatory gray zones internationally are watching which legal theory survives contact with an appellate court.