Kentucky Attorney General Russell Coleman has launched a new legal challenge against several gambling-related companies, filing lawsuits that seek to stop their operations in the state and impose financial penalties. The actions, filed Wednesday in Franklin Circuit Court, target prediction market operators Kalshi and Polymarket as well as VGW, an online gaming company that runs casino-style platforms.

The lawsuits arrive less than a week after a coalition representing prediction market operators sued Kentucky over a newly enacted tax on prediction market transactions. That dispute is also being heard in Franklin Circuit Court, setting up a direct legal clash between state officials and companies involved in the growing prediction market sector.

State Pursues Injunctions Against Operators

Coleman’s office alleges that Kalshi and Polymarket are offering unauthorized sports betting services in Kentucky. The attorney general is seeking permanent injunctions that would prevent the companies from conducting business in the state. The lawsuits also request civil penalties and restitution.

In a statement announcing the actions, Coleman said, “Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws.”

He added, “These multi-billion dollar corporations and their legal fictions don’t pass the sniff test. As one of our state legislative leaders said it best, ‘If it looks like a duck and quacks like a duck …’”

The legal filings extend beyond the named companies themselves. Kentucky is also targeting affiliated entities connected to Kalshi, Polymarket, VGW, and Coinbase. According to the attorney general’s office, each company is accused of operating unlicensed gambling or sports betting platforms within the state.

Kentucky legalized online sports wagering in 2023 after several unsuccessful attempts. The industry now falls under the oversight of the Kentucky Horse Racing and Gaming Commission. Coleman’s office contends that the prediction market companies are operating outside that regulatory framework.

The attorney general also alleges that the companies provide limited support resources for people struggling with gambling addiction, despite requirements under Kentucky law.

Focus on Prediction Markets and Sweepstakes Gaming

The lawsuit against Polymarket argues that prediction market contracts have moved beyond their original purpose. State officials contend that such contracts were initially developed to help commodity traders manage financial risks tied to events that could affect production and market outcomes.

According to the lawsuit, “These contracts were originally developed by commodity traders as a straightforward way of hedging their investments in raw materials, like timber and grain. By purchasing an event contract for an adverse event, like a flood or fire during the harvest season, commodity traders could offset the losses from that year’s poor yield.”

The filing continues, “Defendants, however, have repurposed the event contract to allow consumers to wager on the outcomes of a wide range of real-world and imminent (or already ongoing) events, such as when the United States and Iran will enter a permanent peace deal or whether the Federal Reserve will change interest rates.”

Coleman’s separate case against VGW focuses on the company’s sweepstakes-style gaming model. VGW operates brands including Chumba Casino, Global Poker, and LuckyLand Slots. Kentucky alleges that the company’s dual-currency system violates state gambling laws as well as consumer protection statutes and the Loss Recovery Act.

“This company may use new technology and a new scheme to hide, but the reality is the same,” Coleman said. “Our Office has a duty to stop illegal gambling in Kentucky regardless of how it’s packaged.”

Industry Pushback and Tax Dispute Continue

The companies have indicated they will challenge the state’s claims. A spokesperson for VGW stated, “We respectfully reject the Kentucky Attorney General’s claims and plan to vigorously defend this lawsuit.”

Polymarket also criticized the state’s position. A representative said Coleman’s lawsuit “runs counter” to the federal framework for regulating prediction markets. “We look forward to addressing these claims through the appropriate legal process,” the representative said.

Kalshi likewise argued that federal regulators oversee prediction markets rather than individual states. Company spokesperson Jacki McGavick said, “Courts have already recognized this, and we’re confident they will here too.”

The latest lawsuits follow a separate legal battle over Kentucky’s recently approved 14.25% excise tax on prediction market transactions, which is scheduled to take effect in 2027. The Coalition for Fair Markets filed suit on June 12, arguing that the tax is unconstitutional and unfairly targets prediction market operators.

The coalition contends that the measure favors established Kentucky gaming industries, noting that wagers on horse racing face a lower tax rate of 9.75%. The group argues the legislation “targets prediction market operators alone.”