Following the state of Kentucky rolling out a new 14.25% tax on prediction markets, a coalition has launched legal action against Kentucky. This lawsuit is the latest chapter in the conflict that’s brewing between states and prediction markets.
Prediction market sites allow traders to buy and sell event contracts to predict real-world events. As prediction markets have risen in popularity, Kentucky has launched a new tax to ensure proper regulation. However, prediction market sites feel that this tax is discriminatory and will push traders to illegal sites, so they are fighting to get it removed.
A Must-Try Prediction Market Site
On June 12th, 2026, the Coalition for Prediction Markets sued Kentucky officials over the state’s plans to start taxing prediction markets. The Coalition is made up of leading prediction market sites, including Kalshi, Polymarket, Robinhood, and Crypto.com, which you may already be familiar with from our
list of prediction markets. The new 14.25% tax became law in April, after the General Assembly passed House Bill 757. Gov. Andy Beshear vetoed the bill, but it was undermined by Kentucky’s legislature.
Kentucky officials want to introduce the 14.25% tax, which will be applied to prediction market transaction fees. The idea is that the tax would help to ensure proper regulation for all prediction market sites in the state. However, the Coalition is attempting to block this tax, stating that it’s discriminatory, unconstitutional, and preempted by federal law. The Coalition also believes that taxing federally regulated markets will push traders more towards illegal platforms that offer no protections or oversight.
Recommended Prediction Market Site
Worries Over Reduced Market Liquidity
According to the Coalition, the prediction market operators explained that they work fundamentally differently from traditional online betting. Prediction market sites are designed to aggregate public knowledge and opinion to generate forecasts about a variety of real-world events, including elections, sports, and award shows. As such, these operators are worried that by being treated similarly to online gambling operators, Kentucky’s tax would discourage traders.
Industry experts have raised concerns that the 14.25% tax rate is among the highest in the US, warning that the excessive tax could potentially lead to a reduction in market liquidity. The Coalition of Prediction Markets strongly believes that it will push traders elsewhere, leaving the sites unable to operate profitably in Kentucky.
Final Thoughts on Kentucky’s 14.25% Tax on Prediction Markets
The Coalition for Prediction Markets is challenging Kentucky’s recent tax law that will see operators paying a 14.25% tax fee on transaction fees, highlighting the growing tension between prediction market operators and state regulators. While Kentucky officials are seeking revenue and sustained regulations, prediction market operators are arguing that this is an excessive tax that will only harm traders and the operators.
As the case continues to move, we are awaiting the official outcome from the courts. The outcome has the potential to set a tone and precedent for how prediction market sites are regulated and taxed throughout all 50 US states. So, be sure to bookmark this page and return for all the updates.
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