Kentucky AG Countersues Against Prediction Markets
Mike Goodpaster Published 18/06/2026
When a lobby group filed suit against the state of Kentucky in support of prediction market sites Kalshi and Polymarket, Kentucky Attorney General Russell Coleman made a solemn vow that he would fight back with a vengeance. Well, no one can say that Coleman isn't a man of his word. He is fighting back.
Coleman has countered this legal action by filing lawsuits of his own against both Kalshi and Polymarket. In the suit, it is alleged that the two prediction market companies violated the state’s consumer protection and gambling laws by offering what is essentially illegal sports betting.
Kentucky accuses prediction markets of illegal activities
Kentucky's lawsuit breaks the issue down into simple terms from the state's perspective. The sports-event contracts offered by Kalshi and Polymarket are an attempt to do an end-run on Kentucky's gambling laws.
“Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws,” Coleman said in a statement. “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test.
“As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck…’”
Beyond the belief that the yes and no sports-event contracts offered by prediction sites are nothing more than sports betting in disguise, Kentucky's lawsuit also argues that sites like Kalshi and Polymarket don't pay taxes in Kentucky. They also make no established contribution to help combat problem gambling.
The latter is a condition to operate a sports betting site in the Bluegrass State. Out of the revenue each sportsbook is earning, 2.5% must be earmarked for treatment of those with gambling addictions.
Kentucky's legal and regulated sportsbooks pay a 14.25% tax on revenue.
“Together with the policymakers in the General Assembly and the regulators at the Kentucky Horse Racing and Gaming Commission, we are well-positioned to protect this Commonwealth, just like we’ve been doing for over a century,” Coleman told the Lexington News.
A suit on behalf of the prediction markets was filed late last week
Kalshi and Polymarket were among a coalition of prediction market companies that filed suit against the state of Kentucky late last week. The objective of that suit was to block Kentucky’s recently enacted tax on prediction markets.
House Bill 757 passed through the Kentucky General Assembly, imposing a 14.25% excise tax on prediction market sites operating in the state.
Filing of the lawsuit in Franklin Circuit Court was undertaken by the Coalition for Fair Markets. That's a group representing prediction market companies. The suit calls the 14.25% excise tax on prediction markets unconstitutional and discriminatory.
Prediction market sites are fighting back
Just as Coleman is standing firm, the prediction market sites aren't backing down following this latest legal action. They make a similar argument to Coleman's stand. As they see it, the issue is simple. In fact, it's very straightforward.
Kentucky, or any other state for that matter, has no say in the regulation of prediction market sites. Regulation for prediction markets comes through federal oversight.
"The [Commodities Futures Trading Commission] is our regulator, not the states," Kalshi spokesperson Jacki McGavick told Kentucky Public Radio. "Courts have already recognized this, and we're confident they will here too."
A statement from Polymarket was short and to the point.
"We look forward to addressing these claims through the appropriate legal process," the statement said.