The Department of Revenue administers the prediction market tax. The new statutory language is provided in
KRS 138.506 and
KRS 138.507.
Effective January 1, 2027
House Bill 757, passed during the 2026 Kentucky legislative session, imposes an excise tax on prediction market operators. Beginning on
January 1, 2027, the Commonwealth imposes a tax rate of
14.25% of the prediction market operator's transaction fees. The accrual method of accounting shall be used for purposes of calculating the amount of tax owed by the prediction market operator.
“Prediction market operator” is a board of trade or other person, including any affiliate of the person, that operates a prediction market. This includes but is not limited to a person that satisfies the requirements of ownership, operation, or control of a digital distribution service, digital distribution platform, online portal, or application store where a prediction market may be accessed.
“Transaction fees” means fees charged by the prediction market operator to complete a sale, purchase, or trade of an event contract to a consumer and include the amount paid by a consumer to purchase an event contract from a prediction market operator.
The prediction market operator’s tax returns and payments are due on or before the 20th of the month following the month in which the transactions occurred. The first reporting period, January 2027, will be due on or before February 22nd, 2027.