Kentucky Sued Over Prediction Market Tax, Defying Trump Stance

A coalition of prediction market operators, including Kalshi, Crypto.com, and Polymarket, has filed a lawsuit challenging Kentucky's new 14.25% excise tax on their transaction fees. Enacted in April, the tax is described in the lawsuit as discriminatory, unconstitutional, and preempted by federal law. The coalition, operating under the name Coalition for Fair Markets, argues that the tax disincentivizes prediction markets and is higher than the 9.75% tax applied to wagers at Kentucky's horse tracks.

Kentucky Attorney General Russell Coleman has vowed to defend the tax, framing it as integral to the state's sports betting laws and characterizing the out-of-state challengers as threats. The lawsuit contends that taxing federally regulated markets pushes users toward illegal platforms lacking oversight. Prediction markets aim to gain legitimacy by allowing trades on real-world events, though recent insider trading allegations, including those involving former Rep. George Santos and an Army soldier, have surfaced.