AppWizard
July 1, 2026
Kalshi has filed a federal lawsuit against the state of Illinois, challenging a law that imposes taxes and licensing requirements on sports-related trades in prediction markets. The lawsuit questions whether contracts traded on Kalshi's federally regulated exchange are classified as sports bets under state laws or as financial derivatives overseen by the Commodity Futures Trading Commission (CFTC). Illinois law categorizes prediction market operators as sports wagering businesses, imposing a 1.75% tax on the first five million sports wagers annually, increasing to 3.5% for wagers above that threshold, along with a costly licensing requirement. Kalshi argues that these state requirements are preempted by federal law and contends that its offerings are financial instruments, not traditional wagers. The dispute reflects a broader conflict between federal and state regulators regarding jurisdiction over prediction markets, with the CFTC previously filing a lawsuit against Illinois over similar regulatory issues. The outcome of this legal battle could have implications for the regulation of prediction contracts related to various events beyond sports.
