Kalshi, Crypto.com and Polymarket sue to block Kentucky's 14.25% prediction markets tax
A coalition including Kalshi, Crypto.com, and Polymarket has sued Kentucky to block a 14.25% excise tax on prediction market transaction fees. The suit, filed June 12 in Franklin Circuit Court by the Coalition for Fair Markets, argues the levy on event-contract trading is unconstitutional and discriminatory. The tax applies to fees generated by prediction market trading activity at a rate far above typical sales or excise taxes. The coalition brings together a CFTC-regulated exchange, a major crypto platform, and a crypto-native prediction market in a rare joint legal action against a state tax regime.
Kalshi and Polymarket must now defend Kentucky accounts from both Attorney General Coleman's state gambling suit and this tax challenge they filed against the same state. Any adverse ruling on either front risks forcing both platforms to geofence Kentucky while their federal CFTC registration is tested in preemption litigation.
Joins a running pattern of Kentucky and New Mexico forcing Kalshi and Polymarket to fight on dual state and federal fronts, with each state now hosting both a state enforcement action and a parallel platform challenge or CFTC preemption suit.