Kalshi, Polymarket, and other platforms jointly sued Kentucky for its 14.25% transaction tax.

According to a report by the Associated Press on June 14th, several prediction market platforms, including Kalshi, Crypto.com, and Polymarket, formed a coalition and filed a lawsuit in state court this Friday, attempting to block Kentucky's newly implemented 14.25% prediction market transaction tax. This tax, passed by the Kentucky legislature in April, targets transaction fees charged by prediction market platforms at a rate of 14.25%, higher than the approximately 9.75% tax rate levied on the local horse racing industry. The plaintiffs claim in the lawsuit that the tax is discriminatory, unconstitutional, and may conflict with federal law. Prediction market platforms allow users to trade contracts on real-world events (such as economic data and election results), essentially constituting an event-driven derivatives market. The plaintiffs argue that the tax will significantly increase compliance costs and may force trading activity to less regulated offshore platforms. Kentucky Attorney General Russell Coleman stated that he will resolutely defend the law in court and that the state government is capable of handling the challenges. Meanwhile, Kalshi stated that excessively high state taxes would weaken the competitiveness of legitimate markets and could drive users to unregulated and unprotected illegal trading platforms. This case is seen as the latest development in the ongoing conflict between the US prediction market industry and state regulatory and tax systems.