The lawsuit says the April measure unfairly singles out prediction market trading fees and may conflict with federal law, while Kentucky Attorney General Russell Coleman said the state will defend it.
An industry coalition including Kalshi, Crypto.com and Polymarket has sued to block Kentucky’s 14.25% tax on prediction market transaction fees. The challenge argues the levy, passed by the Kentucky legislature in April, is discriminatory and unconstitutional and may be preempted by federal law, meaning federal rules could override the state measure. Kentucky Attorney General Russell Coleman said his office would defend the rules. The case targets what the lawsuit describes as the first known state-specific tax in the United States aimed at the prediction market industry.