Illinois Tells Kalshi to Shuffle Off Its Sporting Contracts, and Kalshi Says, "I'll See You in Court

Kalshi has filed suit against Illinois officials in federal court, escalating a jurisdictional fight over whether state law can restrict the sports-related prediction contracts traded on its platform. 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, and argues that a newly enacted Illinois statute, Senate Bill 3019, "expressly bans sports event contracts" Kalshi offers its users, in defiance of federal authority. The law was carried into Illinois' fiscal year 2027 budget package and is set to take effect July 1.

Kalshi alleges that the Illinois legislation, paired with a 0.2% levy on crypto transactions, will force the company to "cease offering" its sports event contracts in the state or build costly geofencing tools to block Illinois residents. "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," the complaint states. The platform's lawyers say the state is "usurping" the authority of the US Commodity Futures Trading Commission (CFTC), the federal regulator with oversight over swaps.

The new statute also redefined an "exchange wager" to capture "any 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." A new state "Sports Wagering Fund" is set to launch July 1 and will impose a 15% tax on gross receipts from sports-related prediction market wagers. Kalshi argues the tax improperly treats its contracts as gambling when they are federally regulated swaps, not wagers.

The CFTC, led by Commissioner Michael Selig, has claimed exclusive authority over event contracts as "swaps" under the Commodity Exchange Act, and the agency has backed Kalshi's view in ongoing skirmishes with several states. Federal regulators last week filed a motion for preliminary injunction to prevent Illinois from enforcing the law. Kalshi's lawsuit is the latest in a wave of actions over the past year, including similar litigation in Kentucky, that attorneys expect will ultimately be resolved by the US Supreme Court, given the clashing positions of state regulators and federal authorities.