Predictive marketing company Kalshi has filed a lawsuit against Illinois state officials over a regulation on its platform that “expressly prohibits contracts for sporting events.”

In a lawsuit filed Tuesday in the U.S. District Court for the Northern District of Illinois, Kalshi alleged that Illinois Gov. J.B. Pritzker, Attorney General Kwame Raoul and other state gaming commission officials “usurped” the U.S. Commodity Futures Trading Commission’s (CFTC) authority over forecasting markets.

Specifically, the company alleged that legislation went into effect last week in Illinois requiring prediction marketplace platforms to be licensed by the state to offer contracts for sporting events, in violation of federal law. Kalshi claimed that Illinois Senate Bill 3019 would result in “irreparable damage” when it goes into effect on July 1.

“If Kalshi complies with the new state law and stops offering contracts for sporting events in Illinois, Kalshi would violate the CFTC’s uniformity requirements, harm Kalshi’s commercial interests, and require the company to implement complex and costly technological solutions to restrict access in Illinois, resulting in costs that would not be recoverable if Kalshi ultimately prevails in the lawsuit,” the complaint said.

Source: PACER

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

Legislation changed the state’s definition of “exchange bet” includes “an agreement, contract, transaction, or exchange that is offered, traded, or effected on a prediction market or exchange relating to a sporting competition or event,” which makes prediction market companies subject to the same rules as sports betting providers.

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“[…] “Kalshi risks similar irreparable harm if it attempts to comply with SB 3019 by offering contracts for sporting events under Illinois’ costly and restrictive licensing and regulatory system,” the company said. “Nor can Kalshi avoid these harms by simply disregarding the state’s unlawful requirements, because enforcement actions by Illinois could subject Kalshi to criminal penalties.”

Legal battles eventually made it to the Supreme Court?

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

The CFTC, led by Commissioner Michael Selig, has claimed exclusive authority over the companies under the Commodity Exchange Act, arguing that contracts for platform events constitute “exchanges” within its jurisdiction. The agency has filed several lawsuits against state governments over this claim, most recently in response to Kentucky’s restrictions on forecast markets.

Some experts expect the legal battles to end up in the U.S. Supreme Court, given the opposing claims from federal regulators and state gaming officials.

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