The US Commodity Futures Trading Commission filed a lawsuit in federal court against Kentucky officials to block the state's legal action against prediction market operators. Kentucky sued platforms Polymarket and Kalshi, along with their partners Coinbase, Robinhood, and Webull, claiming the companies operate without required state gaming licenses. The CFTC argues that prediction markets fall under federal commodities law and its exclusive jurisdiction, while Kentucky contends the platforms offer unlicensed sports wagering products subject to state regulation.
CFTC Claims Exclusive Federal Jurisdiction Over Prediction Markets
The CFTC filed the lawsuit seeking declaratory and injunctive relief against Kentucky Governor Andrew Beshear, Attorney General Russell Coleman, and the Kentucky Horse Racing and Gaming Corporation. CFTC Chair Mike Selig stated that Kentucky is the latest state attempting to shut down federally regulated event contracts and that the Commission is committed to defending its authority over prediction markets. Kentucky is the ninth state targeted by the CFTC in similar legal disputes involving prediction market regulation.
The CFTC holds that Kalshi and Polymarket operate designated contract markets under federal law and that the event contracts they offer qualify as swaps under US commodities regulations. The agency argues that Coinbase, Robinhood, and Webull are registered futures commission merchants legally permitted to offer these contracts through partnerships with regulated exchanges.
Kentucky Accuses Platforms of Unlicensed Gaming Operations
Kentucky authorities argue that the companies are conducting business without required Kentucky gaming licenses and are failing to comply with state gambling regulations. The state claims that sports-related event contracts offered on these platforms effectively constitute sports wagering under state law.
Kentucky also accused the companies of failing to provide adequate resources for users who may be struggling with gambling-related issues, which the state argues is a requirement under its gaming regulations. Sports betting oversight in Kentucky has been managed by the Kentucky Horse Racing and Gaming Corporation since 2023.
CFTC Challenges Kentucky's 14.25% Excise Tax
The lawsuit challenges Kentucky's 14.25% excise tax on prediction market transaction fees. The CFTC contends that the tax is designed to discourage or effectively eliminate prediction market activity in the state by making operations economically unsustainable.
Trump Supports CFTC Authority in May Statement
President Donald Trump stated in May that it is critically important for the CFTC to be the primary authority overseeing prediction markets in the United States.
FAQ
What did the CFTC do regarding Kentucky's action against prediction markets?
The CFTC filed a lawsuit in federal court against Kentucky officials including Governor Andrew Beshear, Attorney General Russell Coleman, and the Kentucky Horse Racing and Gaming Corporation to block the state's legal action against prediction market operators Polymarket, Kalshi, Coinbase, Robinhood, and Webull.
Why is the CFTC challenging Kentucky's 14.25% excise tax on prediction markets?
The CFTC contends that Kentucky's 14.25% excise tax on prediction market transaction fees is designed to discourage or effectively eliminate prediction market activity in the state by making operations economically unsustainable.
