CFTC sues Kentucky over state actions against contract markets

The U.S. Commodity Futures Trading Commission has sued Kentucky to stop the state’s enforcement actions against Kalshi and Polymarket and to challenge a new 14.25% excise tax on prediction-market transaction fees, arguing that both intrude on the agency’s exclusive jurisdiction over event contracts under the Commodity Exchange Act. The June 23 complaint names the Commonwealth of Kentucky, Governor Andy Beshear, Attorney General Russell Coleman, Department of Revenue Commissioner Thomas Miller, and the Kentucky Racing and Gaming Corporation, and asks the court to declare Kentucky’s prediction-market laws unconstitutional and bar their enforcement. The filing came six days after Coleman sued Kalshi and Polymarket in Franklin Circuit Court, accusing them of operating illegal sportsbooks in Kentucky; the Kalshi case also names Coinbase, Robinhood and Webull, while the Polymarket case alleges false and misleading advertising. Kentucky said 89% of Kalshi’s $23 billion in 2025 contract volume came from sports wagering. The case lands as courts are split on whether sports prediction markets fall within federal derivatives oversight, with Polymarket appealing an adverse Michigan ruling to the Sixth Circuit after other courts in New Jersey and Arizona delivered more favorable outcomes for platforms. The dispute is becoming a central test of federal preemption in prediction markets as the CFTC expands its campaign against state restrictions and industry groups separately challenge Kentucky’s planned fee regime.