A coalition of companies including Kalshi, Crypto.com and Polymarket has filed a lawsuit challenging Kentucky's excise tax on prediction market operators' transaction fees. The tax is higher than the 9.75% tax on wagers at horse tracks in the state and the coalition argues that it is discriminatory, unconstitutional and preempted by federal law.
A coalition of companies including Kalshi , Crypto.com and Polymarket has filed a lawsuit challenging Kentucky 's excise tax on prediction market operators' transaction fees. The tax, which is 14.25%, is higher than the 9.75% tax on wagers at horse tracks in the state.
The lawsuit claims the tax is discriminatory, unconstitutional and preempted by federal law. The coalition argues that taxing federally regulated markets pushes people towards illegal platforms with no oversight and no protections. Prediction markets have been gaining legitimacy as a platform where users can bet on various events, but there have been incidents of traders using inside information to profit. The lawsuit is a challenge to the Kentucky General Assembly's decision to enact the tax in April.
The coalition is fighting for Kentuckians' access to safe, legal markets. Kalshi, one of the companies involved, has stated that it is an American company regulated at home and is joining the fight for safe and legal markets. The Kentucky Attorney General has vowed to defend the statutes and the people of the state from out-of-state companies that seek to cancel Kentucky's sports betting laws. The lawsuit was filed in state court by the Coalition for Fair Markets.
The coalition argues that no state currently levies a state-specific excise tax on derivatives transactions that take place on a federally designated exchange, let alone the sort of specifically targeted and discriminatory tax that Kentucky has imposed. The lawsuit claims that taxing federally regulated markets just pushes people towards illegal platforms with no oversight and no protections. Kalshi has stated that it is joining the fight for Kentuckians' access to safe, legal markets.
Prediction markets have been pushing hard to gain legitimacy among the public and policymakers as a legitimate platform where users can bet on everything from sports to the weather to geopolitical events. There have been several incidents where traders have used inside information to profit on prediction market platforms. One recent incident involved a former politician who was allegedly illegally betting he wouldn't attend President Donald Trump's State of the Union address after initially saying he would.
In April, a U.S. Army soldier was also involved in a similar incident where he was accused of using inside information to profit on a prediction market platform. The lawsuit is a challenge to the Kentucky General Assembly's decision to enact the tax in April and is a fight for Kentuckians' access to safe, legal markets
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