Home / Play / CFTC files lawsuit seeking to block implementation of Kentucky’s prediction market tax

CFTC files lawsuit seeking to block implementation of Kentucky’s prediction market tax

Legal Writer

Publish Date: Jun 25, 2026

Fact checked by: Matt Moreno

Key Points

Lawsuit follows enactment of statute that would tax fees that exchanges charge for trades initiated by people in Kentucky
CFTC alleges that state infringed upon its exclusive authority to regulate exchange transactions
Kentucky has initiated actions against Kalshi and Polymarket in state court

The Commodity Futures Trading Commission has again expanded its litigation against state governments who have taken enforcement actions against prediction market exchanges, this time suing Kentucky officials in federal court. The complaint alleges that Kentucky’s recently enacted statute that taxes exchanges’ revenue from fees violates the United States Constitution and asks the court to block Kentucky authorities from taking any action against exchanges registered with the commission.

The filing closely follows Kentucky Attorney General Russell Coleman suing two of those exchanges in state court over allegations of violating the state’s gambling laws. The federal court lawsuit against Coleman and others could affect that litigation as well.

CFTC announces latest lawsuit against Kentucky officials

According to a release from the Commodity Futures Trading Commission (CFTC), “Kentucky’s effort to restrict the functioning of CFTC-registered exchanges obstructs Congress’ decision to federally preempt state law.” The complaint names the commonwealth, Gov. Andy Beshear, Coleman, the Kentucky Horse Racing and Gaming Corporation, and Commissioner of the Kentucky Department of Revenue Thomas B. Miiller as defendants.

The CFTC has now sued nine states over the operation of prediction market exchanges.

Arizona
Connecticut
Illinois
Kentucky
Minnesota
New Mexico
New York
Rhode Island
Wisconsin

In all of those complaints, the CFTC alleges that Congress gave it sole jurisdiction over the exchanges, and therefore state-level attempts to regulate or restrict the exchanges violates the Supremacy Clause of the U.S. Constitution. In terms of the Kentucky case, the arguments pertain to a case in state court and a recently enshrined statute.

CFTC lawsuit aims to block law, cut short litigation

In April, Kentucky enacted a new law that assesses a 14.25% privilege tax on transaction fees connected to trades on exchanges that originated on devices in the commonwealth. That statute is set to take effect on Jan. 1, 2027.

In mid-June, Coleman sued Kalshi and Polymarket in state court, simultaneously filing a similar action against sweepstakes casino operator Virtual Gaming Worlds. Kalshi and Polymarket are two of the most prominent CFTC-registered prediction market platforms in the U.S.

Coleman’s complaint asks the court to declare trading of markets connected to sporting events illegal in Kentucky and enjoin both exchanges from offering such contracts to people in the state. The CFTC’s lawsuit could interrupt both actions.

The CFTC is asking the U.S. District Court for the Eastern District of Kentucky to strike down the tax law and enjoin Coleman from moving forward with any enforcement actions. At this point, the requested injunctive relief would be a result of the court reaching judgment, which could take weeks if not months.

The state court could move more quickly on Coleman’s complaint, but it’s also possible that the CFTC could ask the federal court for a preliminary injunction to stymie those developments until it rules on the merits of the CFTC’s arguments. In fact, such a petition from the CFTC is likely.

Kentucky has become another U.S. jurisdiction where courts will decide the future of prediction market trading, especially within the context of markets related to sporting events. At this point, the immediate future depends on which court acts first and how that court responds.

Make sure to visit the Ballislife Play page for more of the latest news and updates.

Play

Judge Sides with Cardroom Operators: Strikes Down DOJ Ruling

A court in California has made a ruling that casts aside a previous ruling that banned cardrooms in the state. San Francisco Superior Court Judge Richard Darwin issued a preliminary injunction with his opinion that the California Department of Justice and its Bureau of Gambling Control was out of bounds ...

by Dan Holmes

4 hours ago