Kentucky sues prediction market platforms Kalshi and Polymarket

The Commonwealth of Kentucky filed lawsuits in state court against prediction market platforms Kalshi and Polymarket, alleging both companies operated unlawful wagering businesses that solicited bets from Kentucky residents. The complaints seek injunctions, civil penalties and restitution.

The filings describe platforms that let users buy and sell event-based contracts that pay out if specified outcomes occur, including elections and economic indicators. The state contends those contracts meet Kentucky’s legal definition of gambling and that the companies lacked required state gambling licenses.

According to the complaints, both platforms made services available to people physically located in Kentucky through online accounts and marketing, and accepted funds from those accounts to buy outcome-based contracts. The state asserts the platforms did not comply with Kentucky wagering statutes and consumer protection laws aimed at regulating or prohibiting unlicensed gambling.

The lawsuits identify specific transactions and account activity that the filings characterize as evidence of accepting bets from Kentucky residents. The complaints ask the court to bar the companies from offering contracts to state residents, to require return of funds to affected customers, to impose civil fines, and to produce records related to Kentucky accounts and platform operations.

Kalshi and Polymarket use similar online market models but have different regulatory histories. Kalshi has sought federal approval to operate as an exchange for event contracts. Polymarket has employed crypto-based settlement and decentralized interfaces for parts of its platform.

The filings note that prediction markets have been the subject of regulatory review in other jurisdictions and raise legal questions about whether such platforms are classified as exchanges, betting operators, securities brokers or commodity traders and which regulators have oversight.

The cases are pending in Kentucky state court. The lawsuits will be resolved through the state court process, where judges will consider whether the platforms’ contract structures and settlement methods fall within Kentucky’s statutory definitions and what remedies, if any, are appropriate.