On Tuesday, the Commodity Futures Trading Commission (CFTC) filed a lawsuit against Kentucky in federal court. The legal complaint seeks injunctive relief over Kentucky’s civil enforcement actions against prediction market exchanges. To date, these include a 14.25% tax on PM transactions in addition to state-sponsored lawsuits against Kalshi, Polymarket, Coinbase, Webull, and Robinhood.
READ: CFTC vs. Kentucky (filed in the US District Court on June 23, 2026)
“The event contracts targeted by Kentucky are ‘swaps’ under the CEA, and the exchanges that offer these event contracts are CFTC-regulated DCMs,” reads the CFTC’s lawsuit on page 2. On page 4, the CFTC tells the US District Court for the Eastern District of Kentucky that “unless restrained and enjoined by the Court, Defendants are likely to continue their attempts to subvert federal law and the CFTC’s exclusive jurisdiction to regulate event contract swaps conferred on the Commission by Congress.”
In an official statement published Tuesday, CFTC Chairman Michael Selig repeated the agency’s stance that it is the sole regulator of prediction market event contracts. “Kentucky is the latest state attempting to shut down federally-regulated event contracts,” said Selig. “Prediction markets provide Kentuckians with valuable information about the likelihood of future events and offer risk management products relied on by Kentucky businesses and individuals.”
The chairman renewed his promise to retain the agency’s lone oversight role over PM event contracts, including those that are related to sports outcomes. “As I’ve consistently pledged, the CFTC is firmly committed to maintaining its exclusive jurisdiction over prediction markets, and today’s lawsuit against Kentucky is yet another example of the Commission protecting its federal interests.”
To date, the CFTC has launched legal action against Kentucky, New York, Connecticut, Minnesota, Rhode Island, Arizona, Wisconsin, New Mexico, and Illinois. It has also filed amicus briefs with the US Court of Appeals for the Sixth (Cincinnati) and Ninth (San Francisco) Circuits. The most pressing case requiring injunctive relief is perceived by many prediction market advocates to be Minnesota, where the state plans to enact its own “criminalized” version of a prediction market ban on August 1st.
A recent summary published earlier this month by Straight to the Point Substack author Steve Ruddock shows just how many jurisdictions are involved in the prediction market legal battle across the country. Twelve states (now including Illinois) have been sued directly by Kalshi, nine states (including Kentucky) are now facing legal actions launched by the CFTC over prediction markets, and six states have taken legal actions against Kalshi.
There are also three tribal lawsuits against prediction market sports contracts that have been filed in New Mexico, Wisconsin, and California. Prediction market proponents and detractors alike seem to agree that the debate will inevitably come before the US Supreme Court in 2027 or 2028.
Until that time, the lawsuits will have to be heard in their respective jurisdictions, which in some cases could take until next year for the corresponding rulings to be handed down.
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