Kalshi Sues Illinois Over New Prediction Market Licensing Requirement, Seeking Court Order to Block Law

Kalshi filed a federal lawsuit against Illinois on Tuesday, seeking to block a new state law that requires prediction market platforms to obtain a gaming license from the Illinois Gaming Board. The company argues the law is preempted by federal authority under the Commodity Exchange Act and would force it into an impossible compliance situation between state and federal regulatory requirements that conflict directly with each other.

Named as defendants are Illinois Governor JB Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board. Kalshi is asking the U.S. District Court for the Northern District of Illinois to issue a temporary restraining order and both preliminary and permanent injunctions blocking enforcement of the law. The licensing requirement, part of Senate Bill 3019 that Governor Pritzker signed on June 16, took effect July 1 alongside a new transaction tax on prediction market contracts.

The Illinois Law and Why Kalshi Objects

SB 3019 added prediction markets to Illinois’s Sports Wagering Act, creating a state licensing framework for platforms that offer sports-related event contracts. The law also imposes a 1.75% transaction tax on each of the first 5 million contracts a platform processes in a year, with the rate rising to 3.5% thereafter. The Illinois Gaming Board had already sent cease-and-desist letters to Kalshi, Robinhood, and Crypto.com in 2025 before the law passed.

Kalshi argues the law directly conflicts with the Commodity Exchange Act, which grants the CFTC exclusive jurisdiction over exchange-traded derivatives and event contracts. The company says the state requirement would force it to deploy geofencing technology to block sports contracts in Illinois at significant unrecoverable cost, and that operating under a state gaming license would put it in conflict with CFTC requirements for CFTC-registered exchanges. For bettors curious about how prediction markets are regulated and where they can access them legally, Illinois sports betting through licensed sportsbooks remains fully available and unaffected by the prediction market dispute.

The CFTC Is Already Fighting Illinois

Kalshi is not alone in challenging Illinois. The CFTC had already sued Illinois in April, and this week amended its complaint to include the new transaction tax, arguing the fee structure could effectively function as a ban on federally regulated prediction markets. The federal agency also filed for a preliminary injunction to block the law’s enforcement. The combined federal pressure — from both the CFTC and Kalshi’s independent lawsuit — makes Illinois one of the most contested prediction market battlegrounds in the country.

Kalshi has taken similar legal action in Nevada, Massachusetts, and Kentucky, and is now adding Illinois to the list. The pattern reflects a deliberate litigation strategy: when states move to regulate or restrict prediction markets, Kalshi challenges those laws in federal court while simultaneously arguing the CFTC framework supersedes state authority. For Illinois bettors who want to compare what is currently available through licensed sportsbooks, the current DraftKings promo code and FanDuel promo code offer competitive welcome packages for newly registered users.

What Comes Next

Courts in multiple jurisdictions are now weighing the fundamental question of whether the CFTC’s jurisdiction over event contracts preempts state gambling laws. A ruling in any one of these cases — Illinois, Nevada, Massachusetts, Kentucky — could establish persuasive precedent that shapes outcomes across the others. Legal experts widely expect the question to eventually require either a definitive circuit-level ruling or Congressional action to resolve the underlying ambiguity between the Commodity Exchange Act and state sports wagering frameworks. Until then, the patchwork of state-by-state legal uncertainty will continue to define where and how prediction market platforms can operate.