Kentucky's attorney general is suing the prediction market platforms costly and poorly market.

These sites allow users to make money off the outcomes of sports and global and cultural events.

Our June Lefler has more on how states and federal agencies are regulating this kind of betting.

A state tax on prediction markets was set to go into effect on July 1st, at 14.25% of all transactions.

It mirrors the rate of online sports betting.

Now that tax is tied up in the courts after the site sued this month.

The tax is a first of its kind from a state legislature.

But lawmakers said in March they would not do anything else to regulate the prediction market platforms.

Can somebody run a betting on elections?

Yes.

Prediction market companies are offering wagers or derivative swap contracts, as they would tell you, on election outcomes regulated at the federal level by the Commodity Futures Trading Commission.

And that agency has said that we are preempted from directly regulating those products, even though they look very much like wagering.

While states have rights to regulate gambling.

A federal agency says these platforms are closer to open financial markets, and that it sets those rules.

The Commodity Futures Trading Commission has taken this authority so strongly that it has sued Arizona, Illinois and other states for their attempts to tax or stop this kind of wagering.

Still, states, including Kentucky, continued to push back on the platforms and the federal status quo.

Attorney General Russell Coleman filed suits last week against Kashi and Poly Market, saying they operate illegal sportsbooks that have no ties to traditional horse tracks and do not connect users to gambling addiction resources.

Unlike Kentucky's regulated sportsbooks, though, the sites are known for bets made on the outcomes of wars or elections.

Coleman focuses his argument on sports betting, which he says makes up nearly 90% of last year's wagers on these platforms.

Ohio made a similar targeted case against Kashi and won in federal court in March.

Kashi is now appealing that ruling.

The result is a growing legal clash, states fighting to regulate what they see as gambling and companies claiming federal protection under the Cftc's slowly evolving rules.

Ultimately, courts and possibly the U.S.

Supreme Court may decide who's in charge.

For Kentucky Edition, I'm Jen Lefler.

Thank you Jim.

The Commodity Futures Trading Commission proposed new rules for prediction markets this month.

It includes little changes to sports wagering with that standard rules and scorekeeping, but would likely intervene in bets on athlete injuries or anything that could be rigged or not in the public's interest.