Key facts
- A coalition including Kalshi and Crypto.com filed a lawsuit challenging Kentucky's new 14.25% excise tax on prediction markets.
- The lawsuit argues the tax is discriminatory, unconstitutional, and preempted by federal law.
- Kentucky Attorney General Russell Coleman vowed to defend the tax.
- The tax is higher than the 9.75% tax on wagers at Kentucky horse tracks.
- The lawsuit claims the tax disincentivizes legal prediction markets and may push users to illegal platforms.
A coalition, including prediction market operators Kalshi and Polymarket, along with Crypto.com, has filed a lawsuit in Kentucky challenging the state's new 14.25% excise tax on prediction markets. Enacted in April, the tax is the first of its kind in the nation and is levied on transaction fees. The lawsuit, filed by the Coalition for Fair Markets in state court, asserts that the tax is discriminatory, unconstitutional, and preempted by federal law. It highlights that the rate is higher than the 9.75% tax applied to wagers at Kentucky's horse tracks.
Kentucky Attorney General Russell Coleman has stated his office will defend the tax, framing the challenge as an attempt by out-of-state companies to undermine Kentucky's sports betting laws. The coalition argues that taxing federally regulated markets pushes users toward unregulated, illegal platforms, compromising safety and oversight. Prediction markets aim to legitimize themselves as platforms for trading on various real-world events, though incidents involving insider trading have occurred, including a case involving former Congressman George Santos and a U.S. Army soldier charged for using classified information to profit on Polymarket.