Kalshi blasts Illinois sports betting law with fresh lawsuit

Share Link copied Kalshi has filed a federal lawsuit challenging a new Illinois law that would require prediction market platforms offering sports event contracts to obtain state licenses before operating. Summary Kalshi has sued Illinois, arguing the state’s sports prediction market law violates federal authority. The company says complying with the law would conflict with CFTC rules and create unrecoverable costs.

The lawsuit comes as Kalshi pursues a reported $40 billion valuation and expands its crypto product lineup. According to a filing submitted Tuesday in the U.S.

District Court for the Northern District of Illinois, Kalshi sued Illinois Governor JB Pritzker, Attorney General Kwame Raoul, members of the Illinois Gaming Board, and other state officials, arguing that the state has overstepped federal authority over regulated prediction markets. The complaint targets Illinois Senate Bill 3019, which was signed into law last week as part of the state’s fiscal year 2027 budget package. Kalshi argued that the legislation unlawfully interferes with the Commodity Exchange Act by treating sports event contracts offered on federally regulated prediction markets as sports wagers subject to state licensing requirements.

The company said the law is scheduled to take effect on July 1. Kalshi says federal rules override Illinois licensing requirements According to the complaint, Kalshi believes the Commodity Futures Trading Commission has exclusive authority over its event contracts because they are regulated under the Commodity Exchange Act. The company alleged that Illinois cannot impose an additional licensing system on products already overseen by the federal regulator.

Kalshi argued that stopping sports event contracts in Illinois would leave the company in conflict with the CFTC’s requirement to operate a uniform national market. The filing also claimed that restricting Illinois users would force Kalshi to build costly technology systems to block access in the state, expenses it said could not be recovered even if it later won the case. You might also like: SpaceX sparks short-squeeze debate as bears pile into SPCX At the same time, the complaint argued that complying with Illinois’s licensing framework would expose the company to another set of costly regulatory obligations.

According to Kalshi, ignoring the new law is also not a practical option because state enforcement could include criminal penalties. The disputed legislation also introduced a 0.2% tax on cryptocurrency transactions, a measure that has already drawn criticism from several participants in the digital asset industry.

In addition, the law expanded the state’s definition of an “exchange wager” to include agreements, contracts, transactions, or swaps traded on prediction markets when tied to sporting contests, placing those products under the same rules as traditional sports betting operators. Legal dispute grows as Kalshi expands business The Illinois case adds to a series of legal disputes over whether states or the federal government has primary authority over sports-related prediction markets. The CFTC, now led by Commissioner Michael Selig, has maintained that prediction market event contracts fall under its jurisdiction because they qualify as swaps under federal law.

Federal regulators have already challenged similar state actions, including recent litigation involving restrictions imposed in Kentucky. Legal analysts have suggested that the conflicting positions taken by state gaming regulators and federal authorities could eventually require resolution by the U.S.

Supreme Court if lower courts continue reaching different conclusions. Meanwhile, the lawsuit comes as Kalshi continues expanding its business. The company has reportedly entered discussions to raise fresh funding at a valuation of about $40 billion, up from the $22 billion valuation it secured less than two months ago.

Sports-related contracts account for roughly 65% of trading volume, according to company data, while multi-outcome combination contracts introduced last year have become one of its fastest-growing products. Recent product launches have also extended Kalshi’s regulated offerings. As reported by crypto.

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