Kentucky Attorney General Russell Coleman has opened a new front in the fight over online wagering, filing lawsuits against prediction market operators Kalshi and Polymarket as well as sweepstakes casino company VGW.
The cases, submitted June 17 in Franklin Circuit Court, accuse the businesses of offering gambling products inside Kentucky without following the state’s licensing and regulatory requirements.
Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws. These multi-billion dollar corporations and their legal fictions don’t pass the sniff test.
More: https://t.co/tFeKWMzeKo pic.twitter.com/4yMGwWUQuj
— Attorney General Russell Coleman (@kyoag) June 17, 2026
The legal actions represent one of the strongest state-level challenges yet against two fast-growing corners of the online gaming world. They also deepen a national argument over who has authority to regulate sports-related event contracts: federal commodities regulators or individual states.
All three companies have indicated they plan to contest the allegations.
VGW told ReadWrite it “respectfully reject[s] the Kentucky Attorney General’s claims” and plans to “vigorously defend this lawsuit.” The company said it has lawfully operated in the United States for more than a decade, providing what it describes as online “Social Plus” games to millions of Americans.
The company added that its offerings are delivered with “robust consumer protections” and stressed that VGW values that include putting players first and ensuring its products are offered safely and responsibly.
Kalshi responded by portraying the lawsuit as a challenge to federally supervised financial markets rather than a consumer-protection measure. Company spokesperson Jacki McGavick said restrictions on federally regulated exchanges would ultimately hurt Kentucky residents.
“The people who get hurt by this tax are Kentuckians,” McGavick said. “Taxing federally regulated markets doesn’t make anyone safer, it just pushes people toward illegal platforms with no oversight and no protections.”
McGavick also reiterated Kalshi’s core legal position, arguing that federal regulators—not states—have jurisdiction over the company’s event contracts.
“Kalshi is a federally regulated exchange — the CFTC is our regulator, not the states,” she said. “Courts have already recognized this, and we’re confident they will here too.”
Polymarket also signaled that it intends to challenge the state’s claims. A spokesperson told ReadWrite that Kentucky’s lawsuit “runs counter to the CFTC’s established framework for regulating prediction markets” and said the company looks forward to addressing the claims through the courts.
Kentucky argues Kalshi and Polymarket resemble sportsbooks
Coleman’s office sees the issue very differently.
State attorneys argue that Kalshi and Polymarket are effectively running sportsbooks without obtaining the licenses required under Kentucky law. Although the companies describe their products as event contracts, the lawsuits contend that customers are still wagering on sports outcomes in a manner that closely mirrors traditional betting.
According to the complaints, Kentucky residents can access the products through websites and mobile apps and stake money on sporting results. State lawyers argue the contracts “fall squarely within the definition of ‘sports wagering’ under Kentucky law … and any reasonable definition of gambling.” Similar language appears in both cases.
Coleman dismissed the distinction between prediction contracts and sports betting, characterizing the argument as a legal workaround.
“As one of our state legislative leaders said it best,” Coleman said, “‘If it looks like a duck and quacks like a duck…’”
That comparison appears throughout Kentucky’s reasoning. The lawsuits reference remarks from State Representative Michael Meredith, who stated the same sentiment.
Kentucky says the platforms offer many of the same options commonly found at licensed sportsbooks, including wagers tied to game winners, point spreads, player statistics, totals, parlays, and proposition bets.
The state further argues that these businesses operate outside the regulatory structure created after Kentucky legalized sports betting in 2023. Oversight was assigned to the Kentucky Horse Racing and Gaming Commission, which licenses operators and enforces standards covering audits, responsible gaming, and consumer protections. Under state law, only approved operators may provide sports wagering services.
In a public statement, the Attorney General’s office alleged that sports-related contracts now account for a large share of Kalshi’s activity. The office claimed sports betting represented roughly 70% of the platform’s trading volume during a selected period in 2025 and nearly 89% of approximately $23 billion in contract volume last year.
Kentucky also alleges that partnerships involving Coinbase, Robinhood, and Webull broadened access to what it considers unlicensed sports gambling products. All three companies are named as defendants in the Kalshi case.
Lawmakers and regulators have been escalating pressure
These lawsuits did not appear out of nowhere.
For months, Kentucky officials have been laying the groundwork for a confrontation with sports-focused prediction markets. Earlier this year, lawmakers approved House Bill 904, a sweeping measure that raises the state’s sports betting age from 18 to 21, limits certain college proposition wagers, and creates a framework specifically addressing prediction market operators.
The legislation imposes a 14.25% excise tax on prediction market transaction fees and bars licensed Kentucky sportsbooks from partnering with Kalshi or Polymarket beginning July 15, 2026.
Many state policymakers have expressed concern that prediction markets increasingly function like sportsbooks while remaining outside Kentucky’s licensing system. Coleman has repeatedly voiced that view and recently joined a bipartisan coalition of attorneys general urging federal regulators not to treat sports event contracts as matters exclusively governed by federal commodities law.
It appears to have foreshadowed the lawsuits now moving through Kentucky courts.
The wider federal-state fight continues
The Kentucky cases arrive as similar disputes gain momentum across the country.
Only weeks before filing suit, Kentucky joined other attorneys general in comments submitted to the Commodity Futures Trading Commission. The coalition argued that sports event contracts and traditional sports bets are essentially the same product.
“Traditional sports bets and sports-related event contracts offered on designated contract markets have no meaningful differences,” the coalition wrote. The letter argued that “any distinction between sportsbook bets and prediction-market bets is illusory” because users can wager on the same outcomes, including game winners, point spreads, totals, and player props.
The coalition pointed directly to Kalshi’s offerings and noted advertisements promoting what the company described as “legal sports betting in all 50 states.”
Kalshi continues to maintain the opposite position. The company argues that its exchange operates under federal oversight through the Commodity Futures Trading Commission and therefore should not be subject to state sports-betting licensing systems.
Kentucky’s action also follows a separate proposed class-action lawsuit filed by residents seeking to recover alleged losses from Kalshi under state gambling recovery laws. Together, those cases may help determine whether prediction markets are viewed by courts as financial exchanges or as sports betting under a different structure.
The lawsuit against VGW focuses on another growing sector of online gaming. Kentucky alleges that Chumba Casino, LuckyLand Slots, LuckyLand Casino, and Global Poker rely on a dual-currency system that mirrors conventional casino gambling.
According to the complaint, players buy virtual Gold Coins and receive Sweeps Coins that can later be redeemed for cash, cryptocurrency, or gift cards. The state argues that these coins function like casino chips because they have redeemable value and can be wagered on games of chance.
The filing states, “Sweeps Coins are therefore a direct equivalent of traditional casino chips; they have a cash value, can be gambled like cash, and can be cashed out by gamblers for the designated cash value or digital equivalent.”
Kentucky also claims the products are intentionally designed to resemble familiar casino experiences. The lawsuit alleges the platforms “offer games that not only function like traditional casino games but are designed to look and feel like them.”
Coleman framed the case as part of a wider effort to prevent gambling businesses from avoiding state law through new technology.
“This company may use new technology and a new scheme to hide, but the reality is the same,” he said. “Our Office has a duty to stop illegal gambling in Kentucky regardless of how it’s packaged.”
Featured image: VGW / Kalshi / Polymarket
