Kentucky’s Attorney General, Russell Coleman, has written a letter to the Commodity Futures Trading Commission (CFTC) arguing sports event contracts found on prediction markets are too similar to sports betting and should be regulated under state oversight.
It comes as a bipartisan group of state attorneys general says the CFTC does not have jurisdiction over sports-related event contracts offered by the platforms.
AG Russell asks government to give them the tools to protect residents
State governments are growing increasingly wary of prediction markets as platforms such as Kalshi and Polymarket expand into sports and political event contracts that many state officials argue resemble unlicensed gambling more than traditional financial trading.
Coleman is adding his state to the list. In a news release, he said: ““There’s not a dollar’s worth of difference between prediction markets’ sports contracts and sports betting, and Kentucky has the jurisdiction and the responsibility to set the rules of the road. Along with nearly every other AG in the country, we’re asking the federal government to recognize that states like Kentucky are well-positioned to protect our people, just like we have been doing for over a century.”
In recent weeks, bipartisan coalitions of state attorneys general have urged the CFTC to recognize state authority over sports-related “event contracts,” warning that prediction markets are bypassing consumer protections, licensing rules and tax structures established for sportsbooks.
New York Attorney General Letitia James joined a 38-state coalition backing lawsuits against Kalshi, while attorneys general from Maryland, Illinois and other states separately pressed the CFTC to stop what they describe as the rapid expansion of federally regulated prediction exchanges into state-regulated gambling territory.
Prediction markets steer clear of Kentucky Derby
Prediction market companies have already felt the stern guidance of Kentucky’s institutions, with one particular recent example providing a potential taste of what is to come.
The Kentucky Derby is the most famous horse race in the United States and the first leg of horse racing’s Triple Crown, but prediction market companies were expressly told to remove any sports event contracts by race venue Churchill Downs spokesperson Breck Thomas-Ross.
He told ESPN: “We reached out to Polymarket and asked for the wagers to be removed. And Polymarket complied.”
The Interstate Horseracing Act is a 1978 federal law that established the framework for horse-race wagering in the U.S., and grants state racing commissions and racetracks broad authority over betting tied to their events.
Last month, Tom Rooney, president and CEO of the National Thoroughbred Racing Association (NTRA), also penned a letter to the CFTC, in which he stated: “The Commission has authority under the [Commodity Exchange Act] to prohibit contracts that are contrary to the public interest. Event contracts based on horseracing outcomes that circumvent the Interstate Horseracing Act of 1978 (the ‘IHA’) fall squarely within this category and are furthermore preempted by other federal laws.”
Kentucky resident sues Kalshi
Meanwhile, a Kentucky resident has filed a federal class-action lawsuit against Kalshi, alleging its sports, election and weather-related event contracts amount to illegal gambling under state law. The suit claims the contracts fuel gambling addiction and promote social harms affecting both adults and minors.
The plaintiffs argue the contracts are “thinly veiled illegal wagers” rather than legitimate financial products. They say Kalshi operates in Kentucky without a gambling license or tax payments required under state law for sports betting operators regulated by the Kentucky Horse Racing and Gaming Commission.
Lead plaintiff Donovan Roberts and other users seek refunds for losses incurred on the platform over the past five years. The lawsuit also argues online gambling platforms make betting constantly accessible and particularly appealing to teenagers, citing research linking social casino games to future gambling habits.
In the complaint, the class says: “In the past, slot machines, table games, and sports betting were limited to casinos and other venues that had to attract gamblers to come to particular venues in specific jurisdictions. Now, Kalshi is one of many companies that has begun offering the ability for gamblers to satisfy their gambling addiction 24-hours-a-day, 365-days-a-year, without having to leave their homes or workplaces.”
