Kalshi Files Federal Lawsuit Against Illinois Over Prediction Market Sports Contract Ban

Prediction markets company Kalshi has filed a federal lawsuit against Illinois Governor JB Pritzker, Attorney General Kwame Raoul and state gaming board officials, claiming a new Illinois law illegally bans sports event contracts on its platform.

The lawsuit was filed Tuesday in the US District Court for the Northern District of Illinois. The law in question, Illinois Senate Bill 3019, takes effect July 1 and requires prediction market platforms to obtain a state license before offering sports event contracts the same rules applied to traditional sports betting operators.

Why Kalshi Says the Law Is Illegal

Kalshi’s core argument is that Illinois has overstepped its authority by regulating something that falls under federal jurisdiction. The company says the state has effectively “usurped” the authority of the US Commodity Futures Trading Commission, which oversees prediction markets under the Commodity Exchange Act.

Kalshi warned it would be “irreparably harmed” if forced to comply. Pulling sports contracts in Illinois would violate CFTC uniformity requirements, while keeping them live under the new state rules would mean expensive licensing and technology costs. Either way the company loses and it says those costs would not be recoverable even if it wins the case.

The same Illinois budget package also included a controversial 0.2% tax on crypto transactions, drawing heavy criticism from across the industry.

This Fight Could End Up at the Supreme Court

Illinois is not the only state pushing back on prediction markets. The CFTC has already sued Kentucky over similar restrictions and has consistently argued that event contracts are federal swaps under its exclusive jurisdiction. Legal experts say the growing pile of federal versus state lawsuits is likely heading to the US Supreme Court eventually.