Kalshi’s suing Illinois in federal court after lawmakers enacted a new 15% tax on sports-related prediction market wagers, according to Decrypt. The state law, set for enforcement starting July 1, creates a Sports Wagering Fund designed to collect 15% of gross receipts from platforms offering contracts tied to sports outcomes. Critics argue the move targets companies like Kalshi. The firm claims Illinois doesn’t have the authority to tax federally regulated prediction markets. With the Commodity Futures Trading Commission (CFTC) also seeking a preliminary injunction to block the law, the escalation signals a brewing federal-state fight.
the filing states, “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”, according to Decrypt.
State Law Expands Taxation to Sports-Related Prediction Markets
On June 16, Illinois passed new legislation amending its Sports Wagering Act to include prediction markets, adding not only an operator tax but a state licensing requirement. Under these new rules, all sports-related prediction market operators have to pay a 15% levy on their gross receipts, sending proceeds directly to a newly established Sports Wagering Fund.
Pritzker signed the measure into law in mid-June, and figures show it’s set to take effect July 1 — just days away. Illinois stands to rake in considerable new revenue as online prediction markets have grown rapidly nationwide, according to Decrypt.
Kalshi Fights State Regulation and Licensing Requirements
Kalshi is challenging the new Illinois law because it requires prediction market operators to get a state license, pay the 15% tax, or risk being banned. The company’s federal lawsuit, filed in the U.S. District Court for the Northern District of Illinois, asserts those requirements would cause “irreparable harm” to its operations. That Kalshi’s core argument relies on CFTC rules mandating uniform contract terms across states, so stopping sports event contracts in Illinois would force the company to choose between conflicting state and federal requirements, according to Courthousenews.
LATEST: ⚖️ Kalshi sued Illinois and Governor JB Pritzker over a new state law requiring prediction market platforms to get a state license, saying the requirements are preempted by federal law. pic.twitter.com/kEWOPJxC1a
— CoinMarketCap (@CoinMarketCap) June 24, 2026
More , Kalshi maintains the Commodity Exchange Act should preempt Illinois’ bid to regulate prediction markets—since the federal regime gives that oversight exclusively to the CFTC.
CFTC Also Moves Against Illinois Tax Law
The CFTC’s own legal maneuver — a motion for a preliminary injunction — aims to halt Illinois from enforcing the tax and licensing scheme. By filing this motion, the CFTC joins an ongoing federal campaign challenging not just Illinois. Also Arizona and Connecticut, over their attempts to regulate prediction markets at the state level.
The Trump administration is suing the State of Illinois to stop it from applying its gambling laws to prediction markets such as Kalshi or Polymarket. https://t.co/Zv76hdWyf6
— ABC 7 Chicago (@ABC7Chicago) April 7, 2026
Industry Impact: Financial and Operational Harm
The new Illinois law could upend the business model for prediction market platforms like Kalshi. Firms now face not only immediate compliance costs but also the threat of state-imposed bans. If companies are forced to exclude Illinois residents or redesign contracts to fit the new framework, published research shows liquidity may suffer, and platforms could see a hit to overall market competitiveness.
Traders following the story have pointed to similar restrictions in other markets resulting in reduced trading depth and the flight of high-volume participants to friendlier jurisdictions.
Precedent Cases and Further State Actions
Across the country, the conflict between federal and state regulation isn’t limited to Illinois.
Next Steps and Potential Resolutions
The real-world implications of Kalshi’s lawsuit and the CFTC’s injunction request will play out in federal courts in the coming weeks. Unless legal action delays enforcement, the 15% tax is scheduled to hit operators starting July 1, while an Illinois ban on selected contracts kicks in by August.
Legal experts and market participants are closely watching to see if federal judges will affirm the CFTC’s sole oversight or if states can keep imposing their own tax and licensing standards.
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Elena Petrova is a regulatory correspondent specializing in crypto law and policy with over 10 years of financial journalism experience. Formerly a finance reporter at Reuters, Elena covers SEC enforcement, MiCA implementation, and global stablecoin regulations. She holds a J.D. from Georgetown Law and is a member of the New York State Bar. Her regulatory analysis is frequently referenced by compliance officers and legal teams at major exchanges.
Conflicts of interest
I have no current legal practice or retainer relationships with any cryptocurrency company. Past employment relationships are listed publicly.
