A sign is seen outside the Commodity Futures Trading Commission headquarters in Washington on August 30, 2020.
Andrew Kelly Reuter
The Commodity Futures Trading Commission announced Tuesday that it will file a lawsuit against the state of Kentucky. The lawsuit comes after the state sued prediction market platforms Karsi and Polymarket, alleging that both companies were operating illegal gambling platforms.
Kentucky becomes the ninth state in which the CFTC has filed suit in a fight to protect what it claims is exclusive jurisdiction to regulate prediction markets. Front Office Sports first reported the federal lawsuit on Tuesday.
“Kentucky is the latest state to seek to terminate federally regulated event contracts,” CFTC Chairman Michael Selig said in a press release announcing the lawsuit. “As I have consistently promised, the CFTC remains steadfast in maintaining its exclusive jurisdiction over prediction markets, and today’s case against Kentucky is yet another example of the CFTC defending federal interests.”
Notably, Kentucky is the first state in which a Republican attorney general has been sued by the commission. So far, the commission has filed suit only in states with Democratic attorneys general, even though states of both parties have pursued the platform.
A total of 20 states are actively involved in litigation against prediction market platforms. Some people are trying to ban it.
States have argued that they have the right to regulate these platforms because of their sports-related event contracts, which are considered similar to regulated sports betting. However, the CFTC argues that these contracts are swaps and therefore fall under the CFTC’s jurisdiction.
“Calci and Polymarket operate illegal sportsbooks in Kentucky and are violating the law,” Kentucky Attorney General Russell Coleman said in a press release announcing the lawsuit against the companies last week.
“These multibillion-dollar companies and their legal fictions don’t pass the sniff test,” he said. “As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck…’
Coleman’s office did not immediately respond to a request for comment on the lawsuit from the CFTC.
Disclosure: CNBC and Kalsi have a commercial relationship that includes customer acquisition and minority ownership.
