Kalshi Sues Illinois, Calls State Law a Federal Overreach With $0.002 Crypto Tax Receipt 🎲

Prediction markets platform Kalshi has filed a lawsuit against Illinois officials, alleging that newly enacted state legislation "expressly bans sports event contracts" and unlawfully encroaches on federal oversight of derivatives trading. The complaint, lodged Tuesday in the US District Court for the Northern District of Illinois, names Governor JB Pritzker, Attorney General Kwame Raoul and members of the state's gaming board, accusing them of "usurping" authority held by the US Commodity Futures Trading Commission (CFTC).

At the center of the dispute is Illinois Senate Bill 3019, signed into law last week as part of the state's fiscal year 2027 budget package. The measure requires prediction market platforms to obtain state licensure before offering sports-related event contracts and redefines an "exchange wager" to include "an agreement, contract, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event." The same budget package included a 0.2% tax on crypto transactions, a provision that has drawn sharp criticism from industry participants. SB 3019 is set to take effect July 1.

Kalshi argued in its filing that compliance with the new statute would force the company to either halt sports event contracts in Illinois — putting it at odds with the CFTC's "uniformity requirements" — or pursue state licensure under what it called a "costly and restrictive" regime. The company also warned of criminal penalties if it simply disregarded the state requirements. "If Kalshi complies with the new state law by ceasing to offer its sports event contracts in Illinois, that would put Kalshi in violation of the CFTC's uniformity requirements, harm Kalshi's commercial interests, and require the company to implement complex and expensive technological solutions to limit access in Illinois — incurring costs that would not be recoverable when Kalshi ultimately prevails in the action," the complaint stated. Kalshi added that it "faces similar irreparable harms if it attempts to comply with SB 3019 by offering sports events contracts in compliance with Illinois's costly and restrictive licensing and regulatory regime."

The suit is the latest front in an ongoing jurisdictional clash between federal regulators and state authorities over sports wagering conducted through prediction markets. The CFTC, led by Commissioner Michael Selig, has maintained that event contracts on platforms such as Kalshi qualify as "swaps" under the Commodity Exchange Act, placing them squarely within federal jurisdiction. The agency has filed multiple actions against states that have sought to restrict such products, most recently challenging Kentucky's limits on prediction markets.

Legal observers have suggested that the competing federal and state claims over the status of prediction-market contracts could ultimately be resolved by the US Supreme Court, given the constitutional questions surrounding the CFTC's asserted exclusive authority and the states' separate interest in regulating sports betting within their borders. The Kalshi lawsuit is currently pending before the Northern District of Illinois.