CHICAGO — Prediction market Kalshi — which offers trades on everything from the World Cup top goalscorers to the winners of the reality show Love Island and the 2028 Democratic primary — sued Illinois on Tuesday over its latest push to regulate sports bets on the platform.
The most recent move in the ongoing legal battle between the state and prediction market operators came after the state enacted new sports wagering taxes to support the $55.9 billion budget it passed this spring.
Illinois classifies Kalshi and other prediction markets as unlicensed sports wagering operators offering the same bets as sportsbooks like DraftKings and FanDuel, but without paying taxes or adhering to reporting standards.
Kalshi disagrees with the state’s characterization and is seeking to block the new requirements before the company becomes subject to criminal penalties for failure to comply when the law takes effect July 1.
“This action challenges the State of Illinois’s clear violation of the Supremacy Clause with respect to the regulation of event contracts,” Kalshi wrote in its complaint, arguing that the “event contracts” offered on prediction markets should be exclusively regulated by the federal Commodity Futures Trading Commission, or CFTC.
The new taxes, enacted under Senate Bill 3019, amended Illinois’ Sports Wagering Act to add a 1.75% tax on the first 5 million sports wagers per fiscal year made on prediction markets, and 3.5% for wagers made after. Those taxes are set to take effect next week, as is a requirement that Kalshi obtain an Illinois sports betting license.
Kalshi, valued at $22 billion last month, called the licensing “costly and burdensome” in its complaint. The initial license fee for online and mobile sports wager operators costs $15 million and is valid for four years, with subsequent four-year renewals at a cost of $1 million.
It also challenges the state licensing requirement that the licensee “may only accept an entry from a person physically located in the state,” requiring the use of geolocation tracking to ensure adherence to the law. Kalshi says complying with that requirement would put it in “direct violation” of the CFTC’s requirement that contract markets offer nationwide and uniform access to their markets.
Read the full complaint here: Kalshi complaint (PDF)
Sports bets or grain futures?
President Donald Trump, his family and business associates have promoted prediction markets and vowed to fight state efforts to regulate them. Anonymous gamblers have made huge bets in the unregulated prediction markets shortly before Trump announcements, profiting handsomely and raising concerns that people closed to the administration could be engaging in a type of insider trading.
Read more: Illinois regulators say prediction markets are illegal gambling, but bettors — and the Trump family — love them | Trump administration sues Illinois over state’s attempts to regulate prediction markets
The CFTC also sued Illinois earlier in April to assert its jurisdiction over prediction markets after the Illinois Gaming Board sent cease-and-desist letters to operators including Kalshi and Polymarket. The federal regulator argued that the sports event contracts the markets offer are more similar to grain futures than to sports wagers, giving it exclusive jurisdiction.
The regulatory tug-of-war comes as sports wagering in the state has exploded, with Illinois residents losing nearly $1.5 billion on legal sports bets last year alone — after payouts.
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The Kalshi suit, filed in the U.S. District Court for the Northern District of Illinois, named Gov. JB Pritzker, Illinois Attorney General Kwame Raoul, Illinois Gaming Board Administrator Marcus Fruchter and the four members of the Illinois Gaming Board as defendants in their official capacities.
In its most recent motion filed on , Kalshi sought emergency treatment for a temporary restraining order and preliminary injunction to prevent enforcement of the new law before it takes effect on July 1.
Raoul’s office said it is reviewing the complaint. The Gaming Board did not respond to a request for comment from Capitol News Illinois.
Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.
This article first appeared on Capitol News Illinois and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.