Kentucky AG Sues Kalshi, Polymarket and VGW over Illegal Gambling Claims

FRANKFORT, Ky. – Kentucky Attorney General Russell Coleman has filed lawsuits against Kalshi, Polymarket and VGW over alleged illegal gambling activity.

The cases raise the pressure on prediction market and sweepstakes casino operators as states continue to challenge products they say resemble sports betting or online casino gambling without local licenses. Kentucky officials said the companies operated in the state without following gambling laws, tax rules and consumer protection requirements.

The lawsuits were filed on June 17 in the Franklin Circuit Court. Coleman’s office said the cases involve Kalshi and Polymarket, both prediction market platforms, and VGW, the operator behind brands including Chumba Casino, Global Poker and LuckyLand Slots.

Kentucky Says Event Contracts Act Like Sports Bets

The lawsuits against Kalshi and Polymarket focus on sports-related event contracts. Kentucky officials allege the platforms allow users to wager on game winners, point spreads, player statistics and other sports outcomes while avoiding the licensing framework that applies to legal sportsbooks in the state.

Coleman’s office said Kalshi’s sports-related trading made up a large share of its activity in 2025. The state also alleges that Polymarket used social media advertising that gave consumers a misleading impression that it was authorized to offer sports wagering under Kentucky law.

Kentucky’s position is that calling these products “sports event contracts” does not remove them from state gambling law. The attorney general’s office said the platforms bypassed consumer protections, responsible gambling requirements and tax obligations that apply to licensed operators.

The cases follow a wider clash over prediction markets in the United States, where operators argue they fall under federal commodities regulation while state officials argue sports event contracts are gambling products when offered to local consumers. Recently Washington state sued Kalshi over illegal sports betting claims, showing how the dispute has moved across multiple jurisdictions.

VGW Lawsuit Targets Sweepstakes Casino Model

The third lawsuit targets VGW and its sweepstakes casino brands. Kentucky officials allege the company operates unlawful gambling sites through games designed to look and feel like slot machines and casino tables.

The attorney general’s office said the sites use two forms of virtual currency, including free chips and Sweeps Coins with cash value. According to the state, users can pay real money for Sweeps Coins and cash out winnings, which Kentucky argues makes the model comparable to gambling with casino chips.

Coleman said the state’s duty is to stop illegal gambling regardless of how it is packaged. His office is seeking court findings that the companies violated state law, along with penalties under Kentucky consumer protection rules.

State Fight Follows Prediction Market Tax Challenge

The lawsuits came days after the Coalition for Fair Markets challenged Kentucky’s new 14.25% tax on prediction market transaction fees. The coalition includes prediction market and trading companies that argue the tax is discriminatory and conflicts with federal law.

Kentucky has taken the opposite view. Coleman has backed state authority over sports-related prediction market products and previously joined other state attorneys general in urging federal regulators to recognize state jurisdiction over sports betting-style contracts.

The legal fight now gives Kentucky two connected battles over the same fast-growing sector. One centers on whether the state can tax prediction markets, while the other asks whether platforms such as Kalshi and Polymarket are operating illegal sportsbooks under Kentucky law.

For licensed sportsbooks, the cases could affect how states draw the line between regulated betting and federally framed event contracts. For prediction market operators, Kentucky is now another test of whether their sports products can survive state-level gambling enforcement.

RELATED TOPICS: Regulation