Three Major Prediction-Market Platforms Sue Kentucky, Calling Tax Unconstitutional

Prediction markets let users trade event contracts tied to outcomes ranging from elections to game winners, point spreads and player statistics. Kalshi and Polymarket maintain that their US exchanges fall under the Commodity Futures Trading Commission and that the Commodity Exchange Act preempts state gambling rules. State and local authorities counter that sports contracts are functionally wagers offered without the licensing, taxes, age limits and responsible-gambling safeguards imposed on regulated sportsbooks.

Baltimore’s city government filed suit in Baltimore City Circuit Court on Aug. 13, 2026, naming Kalshi, Polymarket and distribution partners Robinhood, Webull and Coinbase as defendants. The complaint alleges the companies operated unlicensed sports-betting services and deceptively presented wagering products as federally regulated financial trading. Baltimore is seeking an injunction, restitution and disgorgement, plus civil penalties of as much as $1,000 for each violation and each day it continues. The filing did not specify an aggregate damages demand.

Kalshi and Polymarket allow users to trade contracts tied to game outcomes, point spreads and player statistics. The dispute centers on whether these products are derivatives subject exclusively to oversight by the U.S. Commodity Futures Trading Commission, or must also comply with state gambling laws. Kentucky separately enacted legislation in April 2026 imposing a 14.25% tax on platform trading fees, above the 9.75% rate on racetrack wagers.

On June 17, 2026, Kentucky Attorney General Russell Coleman sued Kalshi, Polymarket and their partners Coinbase, Robinhood and Webull in Franklin Circuit Court, alleging that they offered sports betting without licenses and failed to provide support for problem gambling. The state described the two platforms as multibillion-dollar businesses. The case puts the Trump administration, which supports exclusive federal oversight, in direct conflict with a Republican-led state government.

Prediction markets allow users to trade “event contracts” tied to the outcomes of contests. Operators including Kalshi argue that such derivatives fall under the exclusive oversight of the U.S. Commodity Futures Trading Commission (CFTC), but Wisconsin considers them sports betting subject to state law. The case therefore raises questions about the boundary between federal and state regulatory authority.

The Wisconsin Department of Justice sued Kalshi, Robinhood, Coinbase, Polymarket and Crypto.com in Dane County court on April 23, 2026, seeking to halt sales of sports event contracts. The complaint alleged that sports contracts generate about 90% of Kalshi’s fee revenue, equivalent to roughly $1.3 billion on an annualized basis. On April 28, the CFTC countersued the state, asserting exclusive federal jurisdiction.