Kalshi, Polymarket Sue Kentucky Over Tax, Call Prediction-Market Levy Unconstitutional

Prediction-market platforms including Kalshi and Polymarket have joined forces to challenge Kentucky's new tax on the industry.

ABC reported on June 13 that the Coalition for Fairer Markets, whose members include Kalshi, Crypto.com and Polymarket, filed suit in a Kentucky court on June 12 seeking to block the tax on prediction-market transactions.

The Kentucky legislature passed a bill in April imposing a 14.25% tax on the transaction fees charged by prediction-market operators. In their complaint, the plaintiffs said the new levy exceeds the 9.75% tax applied to horse-race betting, one of the state's established industries. They argued that the measure is discriminatory, unconstitutional and preempted by federal law.

Kalshi said in a statement that taxing federally regulated markets would only drive people to illegal platforms that offer no oversight or protection. It added that, as a regulated US company, it would fight for Kentucky residents' right to access safe and legal markets.

Kentucky officials have vowed to fight back. Attorney General Russell Coleman said in a statement that his office would defend state law and residents from out-of-state companies seeking to undermine Kentucky's sports-betting laws. He added that his lawyers would have the best odds of winning in any courtroom.

Prediction-market platforms have also faced mounting controversy in recent months after a series of cases in which users allegedly profited from inside information.

Former US Representative George Santos was among the most prominent examples. After saying he would attend President Donald Trump's address to Congress, Santos allegedly placed bets on Kalshi that he would not appear, prompting a federal criminal referral alleging insider trading. In April, Gannon Ken Van Dyke, a US special operations soldier, was charged with using confidential information related to an operation to capture Venezuelan President Nicolás Maduro to make more than $400,000 in illicit gains on Polymarket.