Kalshi, Crypto.com, and Polymarket sue to block Kentucky's 14.25% prediction markets tax
A coalition of Kalshi, Crypto.com, and Polymarket sued on Friday, June 12 to block Kentucky's new 14.25% excise tax on prediction markets, enacted by the state legislature in April. The suit, filed in state court in Frankfort, challenges the tax as unconstitutional and discriminatory against event-contract platforms. Several sources described the levy as the first-in-the-nation state tax specifically targeting prediction market operators' transaction fees. The platforms argue the tax singles out their business model and threatens the viability of regulated event-contract trading in Kentucky. The case marks a novel front in the widening conflict between state fiscal policy and federally supervised prediction market operations.
Kalshi and Polymarket now face a fifth concurrent state-level fight to preserve market access, forcing both platforms to either win federal preemption rulings or absorb a patchwork of geofencing, tax, and criminal exposure costs that directly undercut their U.S. scale.
Kentucky to Minnesota, Rhode Island, New Mexico, and Wisconsin as states where Kalshi and Polymarket are fighting to preserve market access, making state-level fiscal and enforcement barriers the dominant threat to federally regulated platforms.