UMVA has learned that Kentucky's Attorney General has taken a bold stance against the online wagering industry, filing lawsuits against prediction market operators Kalshi and Polymarket, as well as sweepstakes casino company VGW.
The lawsuits, submitted in Franklin Circuit Court, accuse the businesses of offering gambling products inside Kentucky without following the state's licensing and regulatory requirements. This move marks a significant escalation in the state's efforts to regulate the rapidly growing online gaming industry.
According to information obtained by UMVA, the cases 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 stated that it "respectfully reject[s] the Kentucky Attorney General's claims" and plans to "vigorously defend this lawsuit." The company emphasized that it has lawfully operated in the United States for more than a decade, providing online "Social Plus" games to millions of Americans.
Kalshi responded by portraying the lawsuit as a challenge to federally supervised financial markets rather than a consumer-protection measure. A spokesperson argued that restrictions on federally regulated exchanges would ultimately hurt Kentucky residents, saying "The people who get hurt by this tax are Kentuckians. Taxing federally regulated markets doesn't make anyone safer, it just pushes people toward illegal platforms with no oversight and no protections."
Polymarket also signaled that it intends to challenge the state's claims, stating that Kentucky's lawsuit "runs counter to the CFTC's established framework for regulating prediction markets." The company looks forward to addressing the claims through the courts.
Kentucky's Attorney General sees the issue differently, arguing that Kalshi and Polymarket resemble sportsbooks and are effectively running unlicensed sports betting operations. The state contends that customers are still wagering on sports outcomes in a manner that closely mirrors traditional betting.
The state's lawsuits reference remarks from a state legislative leader, who noted that "If it looks like a duck and quacks like a duck…" The Attorney General's office alleged that sports-related contracts now account for a large share of Kalshi's activity, with sports betting representing roughly 70% of the platform's trading volume during a selected period.
The wider federal-state fight continues, with Kentucky joining other attorneys general in comments submitted to federal regulators. The coalition argued that sports event contracts and traditional sports bets are essentially the same product, and that any distinction between sportsbook bets and prediction-market bets is illusory.
The lawsuits against Kalshi, Polymarket, and VGW are part of a larger effort to prevent gambling businesses from avoiding state law through new technology. The Attorney General framed the cases as a necessary step to protect Kentucky residents, saying "This company may use new technology and a new scheme to hide, but the reality is the same. Our Office has a duty to stop illegal gambling in Kentucky regardless of how it's packaged."
