Kentucky AG sues Kalshi, Polymarket and VGW over illegal betting

Kentucky Attorney General Russell Coleman filed lawsuits against prediction market platforms Kalshi and Polymarket and online gaming firm VGW in Kentucky state court, accusing the companies of operating unlicensed sports betting and gambling and avoiding state consumer protections and taxes.

Coleman’s complaint alleges the platforms allow users to wager on game winners, point spreads and player statistics, and that those wagers are not subject to oversight required by Kentucky gambling laws. The filing says sports-related contracts dominated trading on the platforms: about 70% of Kalshi’s trading volume in a 2025 sample period and roughly 89% of nearly $23 billion in contract volume last year came from sports wagering.

The suits follow a separate legal challenge from a coalition representing Kalshi and Polymarket that contested a recent Kentucky law imposing a 14.25% excise tax and new contracting limits. The coalition’s court filing argued the tax concerns exchange-traded derivatives that fall under the Commodity Futures Trading Commission’s exclusive jurisdiction.

Kalshi has maintained it is a federally regulated exchange and that the CFTC, not the states, supervises its activity, a position voiced by Kalshi spokesperson Jacki McGavick. Polymarket described the action as inconsistent with the CFTC’s framework and stated it will address the claims in court. VGW rejected the allegations and pledged to vigorously defend the lawsuit, adding the company has operated in the U.S. for more than a decade and says it provides consumer protections for its online social games.

The case is part of a broader dispute over whether states can regulate and tax event contracts offered by prediction markets or whether that authority rests with the CFTC. The CFTC has asserted exclusive federal authority and has sued several states that sought to regulate such platforms, including Arizona and Minnesota.