Kalshi challenges Illinois prediction market law in U.S. court

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Kalshi challenges Illinois prediction law

Highlights

Kalshi filed a U.S. District Court complaint against Illinois officials to stop SB3019, which introduces state licensing and a 0.2% fee on prediction market transactions effective July 1.
Kalshi claims Illinois' law conflicts with Commodity Futures Trading Commission and Commodity Exchange Act oversight, risking irreparable harm and forcing regulated firms to choose between federal or state violations.
The legal dispute intensifies ongoing federal-state jurisdiction battles, as the CFTC has already sued nine states including Illinois to assert exclusive regulatory authority over prediction markets.

Federal preemption dispute heads to court

As reported by The Block, Kalshi has filed a complaint in the U.S. District Court for the Northern District of Illinois against Governor JB Pritzker, Attorney General Kwame Raoul and other state officials over SB3019, a newly signed budget and revenue law that also creates licensing rules for prediction market platforms.

The company says it faces irreparable harm once the law takes effect on July 1. In the filing, Kalshi argues that Illinois cannot require a state license for prediction markets it says are already regulated at the federal level, because its event contracts fall under the Commodity Futures Trading Commission and the Commodity Exchange Act.

Kalshi also argues that the law's provisions, including a 0.2% charge on the value of digital asset transactions or services provided to Illinois customers, improperly impose state requirements on a federally supervised market. The company says the measure forces regulated entities to choose between violating federal or state law, and has asked the court for a temporary restraining order, a preliminary injunction and a permanent injunction blocking enforcement.

Broader regulatory fight intensifies

The case adds to an ongoing dispute between federal and state authorities over control of prediction markets, especially contracts tied to sports events. The CFTC, under Chair Michael Selig, has argued that the agency has exclusive jurisdiction over prediction markets, while states contend that some platforms may breach local gaming and gambling laws.

Kalshi says that if it stops offering sports event contracts in Illinois to comply with the state law, it could violate CFTC uniformity requirements and incur technology and compliance costs that would not be recoverable if it later wins the case. The company also says it is already registered with the CFTC as a designated contract market.

The CFTC has so far sued nine states, including Illinois, in its effort to assert federal authority. After the CFTC sued Illinois in April, a spokesperson for Pritzker said the state would continue fighting to protect consumers. Offices for Pritzker and Raoul did not immediately respond to a request for comment on Kalshi's latest complaint.

In our earlier article on Cboe’s entry into prediction markets, we covered the launch of its first prediction-style contracts tied to the Mini-S&P 500 Index and how major retail brokers are beginning to provide access. We also noted why this matters for market structure: a regulated exchange moving into outcome-based products could accelerate mainstream adoption and sharpen the debate over how prediction-market contracts should be supervised.

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