Kentucky Attorney General Files Three Lawsuits Against VGW, Kalshi, and Polymarket Over Illegal Gambling Claims
Kentucky AG Russell Coleman filed three separate lawsuits targeting VGW, Kalshi, and Polymarket over alleged illegal gambling operations in the state — the most aggressive state-level action against prediction markets and sweepstakes casinos to date.
Kentucky Attorney General Russell Coleman filed three separate lawsuits in Franklin Circuit Court on June 17, targeting online sweepstakes casino operator VGW and prediction market platforms Kalshi and Polymarket, claiming all three companies are operating illegal gambling in the state without proper licenses.
The lawsuits represent the most aggressive direct legal action taken by a state attorney general against prediction market platforms and a major sweepstakes casino operator to date. While operators had previously taken legal action against Kentucky over a state tax it had imposed on prediction market activity, these new suits mark a significant escalation of the conflict in the other direction.
Three Separate Lawsuits, One Core Allegation
Each lawsuit was filed independently and targets a different company, but the central charge is consistent across all three: operating gambling products in Kentucky without holding the licenses required under state law. Coleman’s office argued that regardless of how these companies describe their offerings, residents of the commonwealth are placing money on the outcomes of events — and that makes the products gambling.
VGW, which operates well-known sweepstakes casino titles including LuckyLand Slots, Global Poker, and Chumba Casino, pushed back strongly. In a statement to media, the company said it “respectfully but completely disagreed” with the attorney general’s characterization of its products and pledged to “vigorously defend” itself. VGW noted it has operated legally in the United States for more than a decade and serves millions of Americans through what it describes as Social Plus gaming — a model that uses virtual currency rather than direct wagering.
Kalshi and Polymarket have similarly maintained that their event contracts are regulated financial instruments overseen by the U.S. Commodity Futures Trading Commission, not gambling products subject to state licensing. The CFTC designation has been the central legal argument used by prediction market operators to resist state-level regulatory requirements, and it remains a contested question in courts and regulatory bodies across the country.
Broader Conflict Between States and Prediction Markets
The Kentucky lawsuits arrive in the middle of a larger battle over who has jurisdiction to regulate prediction markets. In May, Coleman joined a multistate coalition of attorneys general that sent a letter to the CFTC arguing the agency lacked the authority to pre-empt state gambling laws when it comes to sports event contracts. That letter, which attracted signatures from nearly 40 state AGs, made clear that many states view platforms like Kalshi and Polymarket as operating sports betting businesses, not commodity exchanges.
Coleman has been vocal in articulating that view. “There’s not a dollar’s worth of difference between prediction markets’ sports contracts and sports betting, and Kentucky has the jurisdiction and the responsibility to set the rules of the road,” he said when the multistate letter was released in May. The lawsuits filed last week appear to be a direct follow-through on that position.
What Comes Next
All three companies have indicated they intend to contest the lawsuits. The outcome of the Kentucky proceedings could have significant implications beyond the state, as they may establish or clarify the extent to which state attorneys general can take enforcement action against federally designated prediction market operators. Federal courts have not yet produced a definitive ruling on the central jurisdictional question, and cases like these in state courts add additional complexity to an already tangled legal landscape.
For sweepstakes casino operators, the VGW suit signals that state regulators may increasingly scrutinize the model, which has operated largely in a legal gray area by distributing free virtual currency that players can use to enter sweepstakes rather than directly wagering money. The outcome of the Kentucky case could affect how other states approach similar operators going forward.