Why did the Commodity Futures Trading Commission sue Kentucky over prediction markets?

The Commodity Futures Trading Commission sued Kentucky because it argues that prediction markets such as Kalshi and Polymarket fall under federal commodities law rather than state gambling regulations. The lawsuit seeks to block Kentucky's legal action against five prediction market operators.

What does the Commodity Futures Trading Commission claim about Kalshi and Polymarket?

The Commodity Futures Trading Commission claims that Kalshi and Polymarket operate as designated contract markets under federal oversight. The regulator argues that their event contracts qualify as swaps under federal commodities law.

How is Coinbase involved in the prediction market dispute?

Coinbase is identified by the Commodity Futures Trading Commission as a registered futures commission merchant that can offer event contracts through partnerships with designated contract markets. Robinhood and Webull were also cited in the lawsuit.

What does Kentucky's 14.25% prediction market tax mean for operators?

Kentucky's 14.25% excise tax applies to prediction market transaction fees. The Commodity Futures Trading Commission argues that the tax could make it difficult for prediction market operators to conduct business economically within the state.

What does the lawsuit mean for the future of prediction markets in the United States?

The lawsuit could influence whether prediction markets are regulated primarily under federal commodities law or state gambling laws. The Commodity Futures Trading Commission has now sued nine states as it seeks to preserve its authority over federally regulated event contracts.

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CFTC sues Kentucky over prediction markets

Written by Brie CarterPublished Jun 24, 2026, 5:15 AM

The Commodity Futures Trading Commission sued Kentucky to block the state's legal action against five prediction market operators.
The dispute centres on whether prediction markets fall under federal commodities law or state gambling regulations.
The CFTC said it will continue defending its authority over prediction markets and federally regulated event contracts.

The Commodity Futures Trading Commission (CFTC) filed a federal lawsuit against Kentucky after the state sued five prediction market operators, escalating a jurisdictional battle over the regulation of event-based contracts.

Kentucky became the ninth state challenged by the CFTC as the regulator seeks to prevent state authorities from applying gambling laws to federally regulated prediction markets, following a similar lawsuit against New Mexico earlier this month.

“Kentucky is the latest state attempting to shut down federally-regulated event contracts,” said Commodity Futures Trading Commission Chair Mike Selig.

The lawsuit seeks declaratory and injunctive relief against Kentucky Governor Andrew Beshear, Attorney General Russell Coleman and the Kentucky Horse Racing and Gaming Corporation, with the CFTC arguing that platforms including Kalshi and Polymarket operate under federal commodities law.

The regulator also challenged Kentucky's recently enacted 14.25% excise tax on prediction market transaction fees, arguing the measure would make it uneconomic for prediction markets to operate in the state, and following the announcement Kalshi's private market valuation remained unchanged.

The CFTC argued that Kalshi and Polymarket qualify as designated contract markets under its oversight, while partners including Coinbase, Robinhood and Webull act as registered futures commission merchants permitted to offer event contracts.

The legal dispute forms part of a broader campaign by the CFTC under Chair Mike Selig to establish exclusive federal authority over prediction markets, with US President Donald Trump recently stating that it was "critically important" for the regulator to oversee the sector.