Martin was penalized Monday, a day after knocking Dallas forward Dirk Nowitzki to the court in Denver's second-round, series-opening win.
"I'm going to repeat, I think it's wrong and Kenyon didn't deserve a $25,000 fine," Karl said after his team's shootaround for Game 2 on Tuesday night.
Karl said he watched replays of the foul 10 times Monday night, coming away even more perplexed by the fine.
"I saw some hits in Chicago-Boston, some hits in Atlanta-Miami -- this is not on top of the list from my observation," he said. "It's amazing to me."
The league declined to comment on Karl's remarks.
Martin is known for physical play, and Karl wouldn't say if that worked against the forward.
"As a coach, when you're confused and your players are confused it's tough," he said. "My job is to help. At this moment, I'm as confused as Kenyon is."
Rex Chapman, the Nuggets' vice president of player personnel, had a chance to give his opinion Monday to Stu Jackson, the NBA executive vice president of basketball operations.
"We will accept their decision and move forward," Chapman wrote in an e-mail.
The contact occurred midway through the first quarter, with Martin assessed a flagrant foul 1. Karl has no intention of reining in Martin's tenacity.
"Kenyon is a tough defender that gets at times the wrong interpretation because he's so tough," Karl said. "He's not going to get the perfect whistle because the way he plays creates a lot of interpretation."
After the game, Nowitzki downplayed the contact as "just a hard playoff foul." The Mavericks All-Star has no beef with Martin, either.
"We both played hard, had some great battles and left it at that," Nowitzki said Tuesday. "We were laughing at one move that I made on the block where I had like 10 or 11 fakes and he was just standing there. He asked me what the hell I was doing?"
On the play in question, Nowitzki was off-balance when Martin put a shoulder to him, causing him to stumble and then slide across the lane. Nowitzki disputed that he made the foul look worse that it was.
"I don't think I really acted on that play," he said. "It was pretty obvious."
Nowitzki doesn't think Martin will change his style because of the fine.
"K-Mart is K-Mart. He's an aggressive player, an aggressive defender," Nowitzki said. "He goes to the basket hard. I don't think that's going to be in the back of his mind."