FRANKFORT, Ky. (AP) — A coalition that includes Kalshi, Crypto.com and Polymarket filed a lawsuit Friday challenging Kentucky's first-in-the-nation excise tax on prediction markets.
The Kentucky General Assembly in April enacted a 14.25% tax on prediction market operators' transaction fees, a levy the lawsuit says is discriminatory, unconstitutional and preempted by federal law.
Prediction markets are platforms where customers can buy, sell or trade event contracts — a form of derivative that allow placing trades based on whether real-world events, such as election results or economic indicators, will or won't happen.
The new tax is higher than for Kentucky's “favored incumbent industry,” the lawsuit filed in state court by the Coalition for Fair Markets says, noting a 9.75% tax on wagers at horse tracks.
In a statement using gambling terminology, Kentucky Attorney General Russell Coleman vowed to fight the legal challenge.
“You can bet our Office will defend these statutes and the people of our Commonwealth from out-of-state companies that seek to cancel Kentucky’s sports betting laws," he said. “In any courtroom, the attorneys with the AG’s Office are the odds-on favorite to win.”
The tax disincentivizes the operation of prediction markets in Kentucky, the lawsuit says.
“No State currently levies a State-specific excise tax of any kind on derivatives transactions that take place on a federally designated exchange, let alone the sort of specifically targeted and discriminatory tax that Kentucky has imposed here," it says.
Taxing federally regulated markets “just pushes people toward illegal platforms with no oversight and no protections,” Kalshi said in a statement. "Kalshi is an American company, regulated here at home, and we’re joining the fight for Kentuckians’ access to safe, legal markets.”
Prediction markets have been pushing hard to gain legitimacy among the public and policymakers as a legitimate platform where users can bet on everything from sports to the weather to geopolitical events.
There have been several incidents where traders have used inside information to profit on prediction market platforms. It was recently disclosed that former former Congressman George Santos was under investigation for allegedly illegally betting he wouldn’t attend President Donald Trump’s State of the Union address after initially saying he would. In April, a U.S. Army soldier was charged with using classified information to make a $400,000 profit trading on Polymarket on the timing of the U.S. military operations in Venezuela earlier this year.
FILE - The prediction market app Polymarket is displayed on a mobile phone Thursday, April 16, 2026, in Chicago. (AP Photo/Erin Hooley, File)
FILE - The logo for crypto.com appears on a mobile phone and computer screen, in New York, Jan. 31, 2023. (AP Photo/Richard Drew, File)
FILE - An ad for the prediction market app Kalshi is displayed on a mobile phone on April 16, 2026, in Chicago. (AP Photo/Erin Hooley, File)
MONTAUK, N.Y. (AP) — Striped bass fishing has been Bill Jakob's passion for more than 60 years, and he remembers an era when he'd spend all night casting his line into the crashing waves off Montauk and get eight or nine fish ranging up to 40 pounds (18 kilograms), a big catch by anyone's standards.
Then, after years of heavy fishing, the big runs of stripers stopped.
“I’m part of the problem, back in the years. I ran party boats, we slayed fish with reckless abandon,” said Jakob, president of the Montauk Surfcasters Association on the easternmost tip of Long Island.
Increasingly, fishermen like Jakob fear the good days of catching striped bass are coming to an end. The fish aren't showing up like they used to, and young stripers are becoming harder to find.
Scientists who study striped bass say anglers on the East Coast are right to be concerned, and they say years of overfishing are just part of the problem. The fish have experienced eight consecutive years of poor reproduction in their most critical habitat in the Chesapeake Bay, regulators said last week, and the population has declined along much of the Atlantic coast.
Factors like years of warming waters — a prime concern cited by many scientists — poor river flow, drought, pollution and possibly increased predation from seals and sharks have left experts and fishermen asking whether tighter fishing limits would even be enough for striped bass to recover. Losing these higher-level predators, which help regulate smaller fish, would threaten an $8 billion fishing industry and tens of thousands of jobs.
See a visual essay featuring anglers who were fishing the shores of Long Island earlier this month here.
“Stripers” are prized in part because they put up a fight and can be fished right from shore. From the slippery rocks of Maine's coast to the warmer waters of the St. Johns River in Florida, anglers wearing headlamps can be seen casting into the predawn darkness, hoping for a bite.
Interstate regulators have made changes to the way the migratory fish are managed in recent years, including standardizing the way they're measured against size requirements. But regulators have balked at reducing the level of recreational catch. Some fishermen say the current moves might not go far enough, and stricter action — including possibly a fishing moratorium, a strategy used in the 1980s — is needed to ensure that future generations of anglers can still catch striped bass.
“They are not replacing themselves at a sufficient level. That obviously has everybody concerned,” said Beth Versak, the striped bass program manager for the Maryland Department of Natural Resources. “People all up and down the coast are passionate about striped bass.”
Fishing guides, boat trips, gear, bait, hotel rooms — it all adds up to what members of the industry say is about $8 billion in economic impact and as many as 100,000 jobs in the U.S. alone.
And it relies on a fish whose future looks grim.
“Striped bass as we know it is going to collapse,” said Patrick Paquette, government affairs coordinator for the Massachusetts Striped Bass Association and a member of an interstate advisory panel about the regulations.
“Sometime around 2029, 2030 it’s going to go off a cliff,” he said, “and it’s going to be ugly.”
Striped bass hatch in fresh or brackish water and then spend the early years of their lives in estuaries where the rivers meet the sea. Their ability to reproduce and bring new fish into the population is predicated on environmental conditions that favor them — specifically, cool, wet springs.
Scientists identify four major spawning stocks along the Atlantic. The Chesapeake Bay is where up to 90% of stripers spawn and grow. When freshwater flows are too low, such as in times of drought, or when spring or summer temperatures are too high, the fish suffer and populations can fall, said Toni Kerns, fisheries policy director with the Atlantic States Marine Fisheries Commission, which regulates striped bass.
Conditions have been poor in recent years, and fewer fish have entered the population going back to 2019, said Chris Batsavage, chair of the commission's striped bass management board.
“Low precipitation and waters that warm quickly result in weak year classes,” Batsavage said. “It seems like it's environmentally driven.”
The conditions have led to a “slump of bad years” that have made it especially difficult for the fish to maintain their population in the Chesapeake, Versak said.
John Skinner, who wrote a book about striped bass fishing and runs a YouTube channel on the subject that has more than 100,000 followers, has been fishing off Long Island for more than 50 years and says once-reliable spots have completely dried up.
“I'm not saying the fishing is bad. I’m saying when you go there in perfect conditions, you catch nothing,” Skinner said. “Absolutely nothing.”
Many other striped bass fishermen across the Northeast shared a recurring story this summer and fall — the fish's once-plentiful schools are dried up, and the individuals that remain are clearly older, meaning years of reproduction failure are starting to take their toll.
Some fishermen said stricter rules or a fishing moratorium could be the only ways to prevent the fish’s population from becoming dangerously low. And they lament what they’re seeing on the waters — smaller schools of fish, many of them older and larger, with few young fish entering the population to provide a future.
They also see more factors than just the warming environment at play. Some see years of heavy fishing on striped bass becoming apparent today in the form of a lower population. Others blame the resurgence of sharks buoyed by years of conservation efforts, as a reintroduction of competition for the fish.
The Atlantic States commission considers the stock to be overfished, although it says overfishing is not occurring at the moment. The fish are caught commercially as well as recreationally, but recreational fishing is much larger.
Most of the recreational catch is tossed back into the ocean alive. Still, some fish don't survive the encounter. Regulators have historically expected 9% to die after release, while newer data shows the number could be less than 5%.
Limits on how large a striped bass can be caught and kept are typically in the range of 28 to 31 inches (71 to 79 centimeters), with rules varying by state and location. Striped bass are popular with catch-and-release fishermen, and these days, it’s more common to catch larger bass, many well over 31 inches.
Paquette, the Massachusetts Striped Bass Association coordinator and a longtime angler himself, said that without drastic action he fears the end of striped bass fishing.
“If you’re a guy who thought he was going to retire and striped bass fish, and you’re planning on retiring soon, get a different plan,” Paquette said.
Whittle reported from Portland, Maine. Associated Press video journalist Mingson Lau contributed.
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Ryan Cabral, of Dartmouth, Mass, right, and his guide Bill Wetzel fish in the surf for striped bass Friday, Oct. 9, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
Fishermen cast for striped bass below the Montauk Point Lighthouse at dawn Saturday, Oct. 10, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
Fermin Sanchez, of Yonkers, N.Y., hauls up a striped bass Saturday, Oct. 10, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
Jason Markowitz wears a wetsuit in the chilly water off Montauk Point while fishing for striped bass, Saturday, Oct. 10, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
Ryan Cabral, of Dartmouth, Mass, right, and his guide Bill Wetzel fish in the surf for striped bass Friday, Oct. 9, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
Randy Koeper of West Islip, N.Y., surf casts for striped bass at Hither Hills State Park Beach, Thursday, Oct. 8, 2026, in Montauk, N.Y. (AP Photo/Robert F. Bukaty)
