Published on: June 15, 2026, 04:47h.

Updated on: June 15, 2026, 04:53h.

• Kalshi, Crypto.com, and Polymarket unite to contest Kentucky’s tax decision
• Kentucky’s General Assembly approved in April a 14.25% tax on fees for prediction market transactions
• Sports betting has been authorized in Kentucky since 2023

A group including Kalshi, Crypto.com, and Polymarket filed a lawsuit on Friday, June 12, against the state of Kentucky, following its enactment of the first tax on prediction markets in the United States.

Regulation of Sports Betting in Kentucky

Kentucky’s recent comprehensive gambling legislation, House Bill 904, introduced a 14.25% tax specifically on transaction fees imposed on prediction market operators, marking the state as the pioneer in taxing such markets beyond traditional betting establishments.

The regulated status of sports betting is firmly established in Kentucky.

The coalition of prediction market entities contends that the law is unjust, violates constitutional rights, and is superseded by federal commodities legislation. They assert their operations align with federally regulated derivative exchanges under the supervision of the Commodity Futures Trading Commission (CFTC), distinguishing them from conventional gambling entities.

Impact of the 14.25% Transaction Fee Tax

Participants on prediction markets engage in buying, trading, or selling event contracts based on actual occurrences, including sporting events. Sportsbook operators argue that these prediction markets present direct competition while adhering to a distinct set of regulations.

“No state has applied a state-specific excise tax on derivative transactions conducted on a federally sanctioned exchange, let alone the targeted tax that Kentucky has established,” the lawsuit highlights, according to Associated Press.

This legal challenge could set a precedent that defines the ability of states to implement regulations and tax measures on prediction market platforms.

“Our office is prepared to defend these laws and the interests of our Commonwealth against out-of-state firms aiming to undermine Kentucky’s sports betting regulations,” stated Kentucky Attorney General Russell Coleman. “In any legal setting, our attorneys are favored to prevail.”