The regulator argues that prediction markets fall under federal commodities law and are subject to the CFTC’s exclusive jurisdiction, while Kentucky claims the platforms are offering unlicensed sports wagering products. The lawsuit also challenges Kentucky’s 14.25% excise tax on prediction market transaction fees, which the CFTC says could make these markets economically unviable in the state.
CFTC Defends Prediction Markets
The US Commodity Futures Trading Commission (CFTC) filed a lawsuit against the state of Kentucky to block legal action that Kentucky recently launched against several major prediction market operators. The federal regulator argues that prediction markets fall under its exclusive jurisdiction and that states do not have the authority to regulate or prohibit these federally supervised platforms.
The lawsuit was filed in federal court and seeks both declaratory and injunctive relief against Kentucky officials, including Governor Andrew Beshear, Attorney General Russell Coleman, and the Kentucky Horse Racing and Gaming Corporation. According to the CFTC, Kentucky’s actions threaten the federal framework governing prediction markets and create unnecessary conflicts between state and federal regulators.
CFTC Chair Mike Selig stated that Kentucky is the latest state attempting to shut down federally regulated event contracts. He explained that the Commission is committed to defending its authority over prediction markets and ensuring that these markets continue operating under federal oversight. Kentucky is now the ninth state targeted by the CFTC in similar legal disputes involving prediction market regulation.
The conflict began after Kentucky sued prediction market platforms Polymarket and Kalshi, as well as Kalshi’s partners Coinbase, Robinhood, and Webull. State authorities argue that the companies are conducting business without the required Kentucky gaming licenses and are failing to comply with state gambling regulations. Kentucky claims that sports-related event contracts offered on these platforms effectively constitute sports wagering under state law.
The state also accused the companies of failing to provide adequate resources for users who may be struggling with gambling-related issues, which Kentucky 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.
In response, the CFTC holds firm 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 also argues that Coinbase, Robinhood, and Webull are registered futures commission merchants that are legally permitted to offer these contracts through partnerships with regulated exchanges.
The lawsuit also challenges Kentucky’s recently enacted 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.
Post from President Donald Trump
The regulator’s position received support from President Donald Trump, who stated in May that it is critically important for the CFTC to be the primary authority overseeing prediction markets in the United States.
