Kalshi, Polymarket, and other platforms jointly sue Kentucky over a 14.25% transaction tax

BlockBeats News, June 14th, According to the Associated Press, a coalition of several prediction market platforms, including Kalshi, Crypto.com, and Polymarket, filed a lawsuit in state court this past Friday, attempting to block Kentucky's newly implemented 14.25% prediction market trading tax.

The tax, enacted by the Kentucky state legislature in April this year, targets transaction fees on prediction market platforms at a rate of 14.25%, higher than the local horse racing industry's tax level of about 9.75%. The plaintiffs in the lawsuit argue 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, election results, etc.) and are essentially part of the event derivatives market. The plaintiffs believe that this tax will significantly increase compliance costs and may drive trading activity to less-regulated offshore platforms.

Kentucky Attorney General Russell Coleman has stated that he will vigorously defend the law in court, asserting that the state government is capable of addressing the challenges.

Meanwhile, Kalshi has expressed that the high state-level tax will weaken market competitiveness and could potentially push users towards unregulated and unprotected illicit trading platforms.

This case is seen as the latest development in the ongoing conflict between the U.S. prediction market industry and state regulatory and tax systems.