CFTC sues Kentucky in prediction market jurisdiction fight

The Commodity Futures Trading Commission has sued Kentucky after the state took legal action against prediction market platforms Kalshi and Polymarket last week.

The CFTC files its ninth state lawsuit. The agency announced the suit on Tuesday, following Kentucky's action against the two firms for allegedly operating illegal gambling platforms. Kentucky becomes the ninth state the CFTC has sued as it seeks to defend its exclusive jurisdiction over event contracts.

Front Office Sports first reported the federal government's lawsuit. CFTC Chair Michael Selig stated in a press release that Kentucky is the latest state attempting to shut down federally-regulated event contracts. He added that the commission remains committed to maintaining its exclusive jurisdiction over prediction markets.

Kentucky marks a political first for the agency. The state is the first with a Republican attorney general to face a CFTC lawsuit. Previously, the commission had only sued states with Democratic attorneys general, even though states from both parties have targeted the platforms.

In total, 20 states are actively involved in litigation against prediction market platforms. One state has moved to ban them outright. Kentucky joined 19 other states already engaged in such disputes.

States and the CFTC clash over regulatory authority. States argue they have the right to regulate the platforms' sports-related event contracts, viewing them as similar to sports betting. The CFTC counters that these contracts are swaps falling under its jurisdiction. Kentucky Attorney General Russell Coleman said last week that Kalshi and Polymarket are operating illegal sportsbooks in the state and breaking its laws.

Coleman described the companies as multi-billion dollar corporations whose legal fictions do not pass scrutiny. His office did not immediately respond to a request for comment on the CFTC suit. The agency has now sued nine states in its ongoing battle.