Kentucky sues Polymarket and Kalshi over sports betting, names Coinbase, Robinhood, and Webull

Kentucky Attorney General Russell Coleman says the state is suing five cryptocurrency platforms over unlicensed sports betting. For high-risk operators and PSPs, the useful part is not the courtroom theater; it is that prediction markets are still being treated by state regulators as a sports-betting problem, with partner platforms pulled into the dispute.

1. Coleman said Kentucky is taking action against Polymarket and Kalshi, along with Kalshi partners Coinbase, Robinhood, and Webull. His line was blunt: Kalshi and Polymarket are “effectively illegal bookmaking companies” and, in his view, violate Kentucky law.
2. The companies are pushing back on federal-preemption grounds. Polymarket said its prediction markets operate under nationwide regulation from the U.S. Commodity Futures Trading Commission (CFTC). Kalshi’s spokesperson Jacki McGavick said Kalshi is a federally regulated exchange, that its regulator is the CFTC rather than state regulators, and that courts have already recognized that position.
3. This is not just Kentucky noise. Coleman said authorities in 16 other states also argue that blockchain platforms are offering unlicensed sports betting and that such activity requires a state license. Industry gambling groups are making the same basic point: prediction markets are expanding gambling without obtaining the licenses that would normally be required.
4. The trading volume is not trivial. In May, combined trading volume on Polymarket and Kaishi exceeded $25 billion. For PSPs and acquiring partners, that scale is exactly why these products keep drawing regulatory attention: once a market is big enough, everyone starts asking whether it is a derivatives venue, a betting venue, or just a betting venue with better branding.

The political backdrop is also part of the story. U.S. President Donald Trump previously called people blocking prediction markets “scum.” That does not resolve the licensing question, but it does tell you the debate has moved well beyond niche crypto circles.