Kalshi Sues Illinois Officials over Prediction Markets Restrictions

The prediction markets company claimed that it would be “irreparably harmed” when an Illinois law signed as part of a budget package goes in effect on July 1.

Prediction markets company Kalshi has filed a lawsuit against state officials in Illinois over legislation it says “expressly bans sports event contracts” on its platform.

In a Tuesday filing in the US District Court for the Northern District of Illinois, Kalshi alleged that Illinois Governor JB Pritzker, Attorney General Kwame Raoul, and other officials on the state’s gaming board “usurped” the authority of the US Commodity Futures Trading Commission (CFTC) over prediction markets.

Specifically, the company alleged that legislation signed into law last week in Illinois, requiring prediction market platforms to be licensed in the state to offer sports event contracts, violated federal law. Kalshi claimed that it would be “irreparably harmed” when the law, Illinois Senate Bill 3019, takes effect on July 1.

“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,” said the complaint.

The Illinois law, passed as part of a state budget package for the fiscal year 2027, included a 0.2% tax on crypto transactions and has already been heavily criticized by many in the industry.

The legislation amended the state’s definition of 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,” making prediction market companies subject to the same rules as entities offering sports betting.

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“[...] Kalshi 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,” said the company. “Nor can Kalshi avoid these harms by simply disregarding the unlawful state requirements because an enforcement action by Illinois could subject Kalshi to criminal penalties.”

Kalshi’s lawsuit was the latest in a jurisdictional fight between federal and state authorities over sports betting on prediction markets.

The CFTC, headed by Commissioner Michael Selig, has claimed exclusive authority over the companies under the Commodity Exchange Act, arguing that the platform’s event contracts are “swaps” within its jurisdiction. The agency has filed several lawsuits against state authorities over this claim, most recently in response to Kentucky’s restrictions on prediction markets.

Some experts expect that the legal battles will end up at the US Supreme Court , given the opposing claims by federal regulators and state gaming officials.

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