Kalshi has filed a lawsuit in federal court seeking to block a new Illinois law regulating prediction markets, arguing the measure will cause “irreparable harm” if allowed to take effect on July 1.
lawsuit challenges Illinois law
The complaint, filed in the U.S. District Court for the Northern District of Illinois, names Governor J.B. Pritzker, Attorney General Kwame Raoul, and other state officials. It targets SB3019, recently signed into law, which introduces new rules for digital asset activity and prediction market operators.
The legislation includes a 0.2% charge on the value of digital asset transactions and requires prediction market platforms to obtain a state license to operate within Illinois.
Kalshi argues that these provisions conflict with federal law, stating that its event contracts fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC). According to the company, the Commodity Exchange Act preempts the state’s authority in this area.
clash between state and federal oversight
The case highlights a growing jurisdictional dispute between state regulators and the CFTC over prediction markets, particularly those tied to sports events.
CFTC Chair Michael Selig has maintained that federal law grants the agency sole authority over such markets. Illinois and other states, however, argue that their gambling and consumer protection laws apply to these platforms.
Kalshi said complying with the Illinois law would either force it to stop certain operations in the state or spend heavily on systems to restrict access, leading to costs it cannot recover. The firm also warned that conflicting rules could leave operators choosing between violating state or federal law.
broader legal and market implications
The CFTC has already filed similar lawsuits against nine states, including Illinois, as it seeks to affirm its jurisdiction. State officials have indicated they will continue defending their right to regulate these markets in the name of consumer protection.
Illinois’s law stands out for introducing what could become the first targeted state tax on cryptocurrency activity. The 0.2% charge applies to the total value of digital assets when they are exchanged, transferred, or held by businesses on behalf of customers, regardless of profit or loss.
Lawmakers estimate the tax could generate about $60 million in its first year, with implementation scheduled for January 1, 2027.
fast-growing market raises stakes
The dispute comes as prediction markets see rapid growth. Monthly global trading volume across major platforms has surged from under $5 billion in September 2025 to nearly $25 billion by April 2026. More recent data shows continued momentum, including $25.7 billion in March 2026 and a record $10.8 billion in weekly volume ending June 21, 2026.
If upheld, the Illinois law could set a precedent for other states, potentially creating a patchwork of regulations and taxes. Such fragmentation may raise compliance costs and push platforms to restrict access in certain regions, affecting liquidity.
what comes next
Kalshi has asked the court to issue a temporary restraining order, followed by preliminary and permanent injunctions to stop enforcement of the law. The response to this request will determine whether the July 1 start date is delayed and could signal how the broader regulatory conflict will unfold.
For deeper context on evolving US prediction market rules, explore our guide on crypto regulation in the US.
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