Kalshi and Polymarket Coalition Sues to Block Kentucky’s 14.25% Prediction Market Transaction Tax

An industry coalition including Kalshi and Polymarket has filed a lawsuit seeking to stop Kentucky from imposing a 14.25% transaction tax on prediction markets. According to Odaily, the tax was passed by the Kentucky legislature in April this year and applies a 14.25% consumption tax to transaction fees charged by prediction market operators. The lawsuit describes the measure as the first state-level tax in the United States specifically targeting the prediction market industry. The plaintiffs, operating under the name Fair Markets Alliance, argue the tax is discriminatory and unconstitutional, and may be preempted by federal law. The filing also says prediction markets are being subjected to a higher tax burden that is unfair and could distort competitive conditions.