Prediction market platform Kalshi filed a federal lawsuit on Tuesday against Illinois Governor JB Pritzker, Attorney General Kwame Raoul, and state gaming board officials, challenging a new law that effectively bans sports event contracts on its platform.
The legislation, Senate Bill 3019, signed into law last week, amends the definition of ‘exchange wager’ to include prediction market contracts linked to sporting events. Kalshi argues the measure violates the Commodity Exchange Act and usurps the authority of the Commodity Futures Trading Commission (CFTC), which regulates event contracts as swaps.
The law takes effect July 1, and Kalshi claims it would face irreparable harm-either by ceasing operations in Illinois, violating CFTC uniformity rules, or by incurring costly compliance measures. The suit contends that Illinois’s licensing regime conflicts with federal law and could expose the company to criminal penalties if it ignores the state’s demands.
The Illinois law also includes a 0.2% tax on cryptocurrency transactions, drawing industry criticism. However, the broader implications of the case center on a jurisdictional clash between federal and state regulators over prediction markets. The CFTC, under Acting Chairman Michael Selig, has filed multiple suits against states seeking to impose gaming restrictions on such platforms, with a Kentucky case already underway.
Legal experts anticipate the dispute will eventually reach the U.S. Supreme Court, given the conflicting claims of exclusive authority.