The US Commodity Futures Trading Commission (CFTC) has filed a federal lawsuit against the state of Kentucky, escalating a high-stakes jurisdictional battle over the regulation of prediction markets. The lawsuit seeks declaratory and injunctive relief to block legal actions launched last week by Kentucky officials against major platforms like Kalshi and Polymarket, alongside retail brokers Coinbase, Robinhood, and Webull. The federal regulator’s complaint names Kentucky Governor Andrew Beshear, Attorney General Russell Coleman, and the state’s Horse Racing and Gaming Corporation as defendants, asserting exclusive federal authority over event contracts under the Commodity Exchange Act.
Kentucky represents the ninth state the CFTC has sued since December, when Mike Selig was appointed as the commission’s chair. State officials argue that prediction platforms offering sports-related event contracts function as unlicensed sportsbooks violating state-level consumer protection and gambling laws. Conversely, the CFTC contends that these platforms are federally designated contract markets and that their products are classified legally as “swaps,” completely preempting state intervention. The federal agency also targeted Kentucky’s recently enacted 14.25% excise tax on prediction market transaction fees, describing it as a deliberate effort to make these markets economically unviable within state borders.
This legal offensive arrives with notable political dimensions. President Donald Trump recently signaled full support for the CFTC’s exclusive regulatory oversight, while his son, Donald Trump Jr., serves on the advisory structures of both Polymarket and Kalshi. By suing Kentucky, the Trump administration’s CFTC breaks previous partisan enforcement patterns, marking its first federal lawsuit against a state with a Republican attorney general to defend the emerging digital asset and prediction ecosystems.
