CFTC Sues Kentucky to Defend Its Exclusive Jurisdiction Over Prediction Markets

The Commodity Futures Trading Commission sued Kentucky on Tuesday to stop the state from using its own laws to shut down federally registered prediction markets. The suit widens a campaign the agency has now pressed against a string of states.

The CFTC filed a Complaint for Declaratory and Injunctive Relief in federal court Tuesday afternoon, the agency said. The action follows Kentucky's move to bring civil enforcement cases in state court against CFTC-regulated designated contract markets, the venues where event contracts trade, seeking large monetary penalties from them. Kentucky also created a new special transaction fee on those CFTC-regulated markets to push them to leave the state, according to the CFTC. The agency argues that effort obstructs Congress's decision to federally preempt state law.

Selig's Confirmation

CFTC Chairman Michael S. Selig confirmed the filing on his official X account, quote-posting the agency's announcement. "Today's lawsuit against Kentucky is yet another example of the Commission protecting its federal authority," he wrote.

In the press release, Selig framed the dispute around access rather than enforcement. "Kentucky is the latest state attempting to shut down federally-regulated event contracts," he said. "Prediction markets provide Kentuckians with valuable information about the likelihood of future events and offer risk management products relied on by Kentucky businesses and individuals."

The Preemption Argument

The CFTC's case rests on the Commodity Exchange Act, which the agency says hands it exclusive authority over event contracts and preempts state laws that try to regulate designated contract markets. Kentucky's civil suits target those registrants directly, and the new transaction fee raises the cost of operating in the state. The complaint asks a federal court to declare that authority exclusive and to bar Kentucky from enforcing its measures against CFTC registrants.

The agency has leaned on the same statutory reading throughout the standoff. It says the Commodity Exchange Act sets a single national rulebook for designated contract markets, and that letting individual states apply their own gaming penalties would fracture that regime. Kentucky's two-track approach, the litigation plus the transaction fee, gives the agency a fresh target combining both pressure points in one defendant.

Kalshi at the Center

The fight has played out across platforms like Kalshi, the CFTC-registered exchange whose sports and event contracts have drawn the sharpest state pushback. States have argued the contracts amount to unlicensed gambling under their own gaming statutes, often pointing to event markets tied to sports outcomes. The CFTC counters that Congress placed event contracts under one federal regime and that state regulators have no authority to override it.

Kalshi has continued to expand even as the disputes multiply, confirming a $1 billion raise at a $22 billion valuation and filing to add perpetual futures on 12 altcoins after the CFTC cleared its crypto products.

A Widening Campaign

Kentucky joins a roster of states the agency has taken to court over the same question. The CFTC sued New Mexico on June 12, which became the eighth state to face federal litigation after Arizona, Connecticut, Illinois, New York, Minnesota, Rhode Island and Wisconsin. The Defiant covered the Wisconsin filing when it expanded the arc in late April.

Selig's predecessor has weighed in on the other side. Former CFTC and SEC Chair Gary Gensler filed an amicus brief at the Sixth Circuit this month arguing that sports prediction markets fall outside CFTC swap rules, a position that cuts against the agency's own. A tribal coalition has also filed amicus briefs seeking to keep prediction markets off Native land.

The agency said it has also opened proceedings against Minnesota, Illinois and Rhode Island, and submitted amicus briefs to the U.S. Court of Appeals for the Sixth and Ninth Circuits and to the Supreme Judicial Court of Massachusetts. The Kentucky complaint extends a fight whose outcome will decide whether prediction markets run under one federal framework or a patchwork of state gaming rules.