Kentucky Sues VGW, Kalshi, and Polymarket Over Alleged Illegal Gambling

Kentucky Attorney General Russell Coleman has filed three lawsuits targeting VGW, Kalshi, and Polymarket, saying the companies are operating outside the state’s gambling rules. For high-risk operators, the important part is not the rhetoric; it’s the claim that event-based contracts and sweepstakes-style products can be treated as unlicensed gambling when they sit too close to sportsbook behavior.

1. The Attorney General’s Office said the state filed three separate lawsuits: one against Kalshi and several affiliated companies, including Coinbase; one against Polymarket; and one against VGW, the operator behind several sweepstakes casino brands.
2. Kentucky’s case against Kalshi says the platform is effectively offering sports betting contracts in the state without the licenses required of regulated sportsbook operators. State officials argue that users can trade contracts tied to sporting events, which makes the product resemble traditional sports wagering.
3. The complaint also says sports-related contracts make up the majority of trading activity on Kalshi. In the state’s view, that activity falls outside Kentucky’s regulated sports betting framework, which means the company is allegedly avoiding both consumer-protection rules and taxes paid by licensed operators.
4. The Polymarket lawsuit makes a similar argument, saying the company has promoted its sports prediction markets as legal for Kentucky residents despite state objections. Kentucky also named affiliates it says are connected to Polymarket’s offerings, including Robinhood and Webull.
5. On the Kalshi side, Kentucky alleges that Coinbase shared in transaction fees generated through trades on the platform. Coleman kept the language blunt: “Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws.” He also pointed to “multi-billion dollar corporations and their legal fictions,” and repeated the familiar “if it looks like a duck and quacks like a duck…” line.

Coleman has been pushing this line for months. In May, he joined a bipartisan coalition of attorneys general calling for sports event contracts to come under state gaming oversight instead of sitting outside traditional gambling regulation. For PSPs, exchanges, and affiliate-linked platforms, that is the practical issue: when a product starts looking like betting, regulators may decide it should be treated like betting.