Kentucky AG sues Kalshi, Polymarket for running 'illegal gambling’ platforms
Kentucky’s attorney general filed three lawsuits against prediction market and gambling companies he said are operating unlicensed sports betting platforms illegally across the state.
Lawsuits filed June 17 in Franklin Circuit Court by Attorney General Russell Coleman against Kalshi, Polymarket and VGW allege the companies are in violation of the state’s consumer protection laws, its loss recovery act and other recently enacted rules related to prediction markets.
“Our office has a duty to stop illegal gambling in Kentucky regardless of how it’s packaged,” Coleman said in a news release.
The lawsuits are asking a judge to agree the companies violated state law and order them pay the state up to $2,000 per violation of the Kentucky Consumer Protection Act in addition to $10,000 for every violation where conduct was harmful to a person over age 60.
Prediction market lawsuits
Companies like Kalshi and Polymarket run prediction markets where users can buy, trade or sell event contracts — a kind of trading that allows bettors to wage on whether real-world events will take place related to a number of topics.
For example, users can make bets on when the U.S. will confirm aliens exist or on when Trump will reach a deal with Iran to end the ongoing conflict in the Middle East.
They also let users place wagers on sports for game winners, point spreads and player statistics, something Coleman said in a news release bypasses consumer protections and tax requirements mandated by state law.
According to the release, sports wagering made up approximately 89% of Kalshi’s trading volume last year. The company saw nearly $23 billion in contract volume in 2025.
Polymarket on the other hand, Coleman said, uses “flashy” advertisements on social media that give a false and misleading impression it is authorized to offer sports wagering under state law.
The platform offers users the same kind of betting a licensed sportsbook would — like money lines, spreads, prop bets, parlays and more — but calls them “sports event contracts” which “doesn’t make them legal,” the news release said.
The Kentucky Horse Racing and Gaming Commission has the authority to regulate and license sports wagering. Sports wagering operating licenses are only available to the state’s licensed horse racing associations.
And under House Bill 904, which became law earlier this year and will go into effect July 15, licensed sports wagering operations are prohibited from contracting with Kalshi and Polymarket.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman said in the release. “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test. As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck...’”
The prediction market lawsuits claim the companies offer users few or no resources to identify and seek help for signs of gambling addiction though doing so is mandated by state law.
Sweepstakes casino lawsuit
The third lawsuit, filed against VGW and its affiliates, said the company is operating an unlawful sweepstakes casino website. According to the news release, the games are designed to look and feel like traditional slot machines and card tables that “exploit the same psychological triggers related to addiction.”
The casinos offer its users free chips and those with cash value. Real money is used to pay for “Sweeps Coins” just like how gamblers would pay for poker chips at a real casino.
“This company may use new technology and a new scheme to hide, but the reality is the same,” Coleman said in the release.
Other gambling suit
The lawsuits come just a few days after a Washington-based lobbyist group sued the state to challenge a recently enacted law the Coalition for Fair Markets said discriminates against prediction market platforms.
The coalition said the law passed earlier this year is discriminatory because a 14.25% tax placed on event contracts and prediction markets is higher than on other gambling operations, including on horse racing.
The lawsuit argues that the tax violates federal law and the Kentucky Constitution.
In an emailed statement when the lawsuit was filed, Coleman said, “You can bet our Office will defend these statutes and the people of our Commonwealth from out-of-state companies that seek to cancel Kentucky’s sports betting laws. In any courtroom, the attorneys with the AG’s Office are the odds-on favorite to win.”
AG’s position has remained steady
Last month, Coleman signed on to a letter with a bipartisan majority of state attorneys general making a case to the federal Commodity Futures Trading Commission that the state should have jurisdiction over regulating sports-related contracts on prediction market platforms.
The state has also joined two briefs in federal courts supporting other states’ attempt to protect residents from unregulated prediction markets.
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