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Kalshi files lawsuit to block Illinois law taxing company’s revenue

Legal Writer

Publish Date: Jun 25, 2026

Fact checked by: Matt Moreno

Key Points

Illinois included a measure that requires prediction market exchanges to obtain licensure from the state in its latest budget
The budget also imposes a tax on exchanges’ adjusted revenues from trades originating in Illinois of markets connected to sporting events
Kalshi’s complaint asks the court to strike the law down and block its enforcement

Kalshi’s billable hours count for the various law firms that represent it has escalated again, as the company has sued Illinois Attorney General Kwame Raoul and other state officials over a tenet of the state’s budget for the next fiscal year. Illinois has included provisions that affect Kalshi’s offering of event contracts connected to sporting events, essentially treating Kalshi and other exchanges as unlicensed sportsbooks in that regard.

If the provisions take effect, Kalshi would be required to apply for licensure with the Illinois Gaming Board and pay tax upon the revenue it makes from sports-related trades in the state. Kalshi has included a request for immediate temporary protection in its filing, as those provisions are mere days away from taking effect.

(Photo by Samuel Boivin/NurPhoto via Getty Images)

Illinois passes law requiring licensure for Kalshi

Illinois Gov. J.B. Pritzker signed the FY2026-27 budget bill on June 16, finalizing everything in the package, including text from The Prediction Markets Regulation and Taxation Act that legislators included in the budget language. That text has three primary effects on businesses like Kalshi.

The first is that it essentially equates trading event contracts based on sporting outcomes with sports wagers under state law. That puts the activity under the jurisdiction of the Illinois Gaming Board (IGB).

Secondly, Kalshi would be required to obtain a new category of license from the IGB to continue offering trading of sports event contracts in Illinois. Failure to do so would make that activity a violation of state law.

Finally, Kalshi would be required to pay Illinois 50% of its adjusted revenues from that category of trading conducted by people in the state. In its complaint, Kalshi argues that all of these measures are unconstitutional.

Kalshi asks court for immediate and permanent relief from Illinois statute

Fiscal years begin for Illinois’ government on July 1 each year, so that is when these provisions are set to take effect. As a result, Kalshi’s complaint asks the U.S. District Court for the Northern District of Illinois for “a temporary restraining order, preliminary injunction, and permanent injunction prohibiting Defendants, their officers, agents, servants, employees, and all persons in active concert or participation with them who receive actual notice of the injunction, from enforcing” the law.

As justification for that request, Kalshi argues that the statute forces it to choose between compliance with federal and Illinois law governing prediction market trading. Additionally, Kalshi states that the law itself is unconstitutional because it violates the Supremacy Clause of the U.S. Constitution.

The questions before the court will be whether the U.S. Commodity Exchange Act and other federal statutes preempt Illinois law and whether sports event contracts are in fact different from sports wagers.

Even if the court disagrees with Kalshi, Illinois’ attempts to regulate prediction market exchanges could face other obstacles.

CFTC lawsuit could also bar enforcement of licensing requirement

The Commodity Futures Trading Commission (CFTC) sued Illinois officials including Raoul in April, making some of the same arguments that Kalshi has voiced in its complaint. The CFTC has in that action asked the same court to block Illinois authorities from taking action against exchanges registered with the commission.

The Prediction Markets Regulation and Taxation Act would fit squarely within the parameters of such a court order, should the CFTC prevail. That could also affect earlier cease-and-desist demands from the IGB regarding sports event contracts trading.

It’s possible that the court could consolidate the cases as a result, but Kalshi likely hopes that the court will move more quickly on its complaint given the looming effective date for the law in question. In the meantime, Illinois’ attempt to regulate prediction market exchanges faces multiple challenges.

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