Kalshi Challenges New Illinois Prediction Market Law in Court

Kalshi has filed a lawsuit in federal court against Illinois officials, arguing that the state’s new law regulating prediction markets is unconstitutional.

The company says Senate Bill 3019, which takes effect July 1, directly conflicts with federal law by imposing state licensing and gambling rules on federally regulated exchanges

Kalshi operates as a designated contract market under the Commodity Futures Trading Commission (CFTC), which it says has “exclusive jurisdiction” over event contracts. The firm is asking for injunctive and declaratory relief to block Illinois from enforcing the law.

Federal preemption and Kalshi’s case

Kalshi’s complaint stresses that the Commodity Exchange Act gives the CFTC sole authority to regulate event contracts traded on designated contract markets.

The lawsuit points out that SB 3019 redefines exchange‑traded event contracts as “exchange wagers” and forces operators to obtain costly state licenses while limiting trades to Illinois residents.

Kalshi argues that these requirements would put it in violation of federal rules mandating nationwide, impartial access.

The company also noted that the CFTC itself has already sued Illinois, Governor JB Pritzker, and Attorney General Kwame Raoul, accusing them of “aggressive and overzealous” attempts to regulate prediction markets.

The Commission amended its complaint to include SB 3019, and like Kalshi, is seeking a preliminary injunction to stop the law from taking effect.

Kalshi says it’ll face ‘irreparable harm’ if the law takes effect

Kalshi argues that without emergency relief, it will face irreparable harm once Illinois’s law takes effect.

The company says compliance would either force it to shut off access to Illinois residents, violating federal uniformity rules, or submit to a costly state regime that conflicts with CFTC oversight. Ignoring the law, it warns, could expose it to criminal penalties.

“If Kalshi complies with the new state law by ceasing to offer its sports event contracts in Illinois, that would put Kalshi in violation of the CFTC’s uniformity requirements, harm Kalshi’s commercial interests, and require the company to implement complex and expensive technological solutions to limit access in Illinois — incurring costs that would not be recoverable when Kalshi ultimately prevails in the action,” the company stated in the 31-page lawsuit.

The lawsuit frames the issue as a constitutional clash between state gambling laws and federal authority over derivatives markets. Kalshi insists that event contracts are financial instruments, not wagers, and that Congress has reserved regulation of these markets for the federal government alone.

Prediction market fight continues to expand

The case now adds Illinois to the growing list of states where prediction markets have become the center of a legal and regulatory fight.

It is one of nine states currently facing lawsuits from the CFTC over the fast-growing sector, with Kalshi also involved in more than a dozen legal battles across the country, either as a plaintiff or defendant.

Courts in New Jersey, Arizona, and Tennessee have already sided with Kalshi, ruling that state gambling laws cannot reach federally regulated exchanges. Other cases remain pending in Maryland, Nevada, and Ohio.

Meanwhile, several states are exploring their own approaches to regulating or taxing prediction market operators. Kentucky recently introduced a 14.25% excise tax on prediction‑market transactions, prompting lawsuits from both the CFTC and Kalshi. In that case, Kalshi joined forces with Polymarket and Crypto.com to challenge the measure.

Kalshi Challenges New Illinois Prediction Market Law in Court

Federal preemption and Kalshi’s case

Kalshi says it’ll face ‘irreparable harm’ if the law takes effect

Prediction market fight continues to expand

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