Emily Hollingsworth (Tax Analysts): Kalshi Sues Illinois to Nullify New Prediction Market Tax Law
Kalshi has filed suit in federal court to prevent Illinois from enforcing its new prediction market tax and licensing requirements, which the company says will cause it “irreparable harms.”
The prediction market company filed its June 23 complaint under KalshiEX LLC v. Raoul in the U.S. District Court for the Northern District of Illinois.
Kalshi’s complaint stems from S.B. 3019, which will tax transactions and exchanges that occur on prediction markets — online platforms like Polymarket or Kalshi that allow users to place bets on the outcome of sporting matches or other future events.
In a statement provided to Tax Notes June 30, Kalshi said that the company is “fundamentally different from state-regulated sportsbooks and casinos. Courts have already recognized our status as a federally regulated exchange. Illinois is wasting its time and taxpayers’ dollars.”
Kalshi’s complaint says that Illinois’s law, effective July 1, threatens to violate the federal Commodity Futures Trading Commission’s exclusive jurisdiction under the Commodity Exchange Act to regulate federally designated contract markets such as Kalshi.
“The Supremacy Clause is designed to prevent this intolerable situation by making clear that — where federal and state law conflict — state law must give way,” the complaint adds.
States that have attempted to regulate or tax prediction markets have faced swift legal action by the CFTC.
On the same day as Kalshi’s complaint, the CFTC filed suit against Kentucky for its 14.25 percent excise tax on a prediction market’s total contracts placed, a tax that was approved in April. The CFTC alleges that the tax makes it “impossible for prediction markets to operate in Kentucky.”
Kentucky earlier in June had sued Kalshi and Polymarket for allegedly operating as an unlicensed platform for sports gambling.
The CFTC has also filed lawsuits against Illinois and seven other states for attempts to regulate prediction markets.
Previous Coverage:
- Bloomberg: North Carolina Targets Prediction Markets, Sports Betting Taxes (July 2, 2026)
- Kentucky Enacts Excise Tax on Prediction Markets (Apr. 28, 2026)
- Prediction Market Tax Proposals Gain Momentum in State Houses (Apr. 13, 2026)
- Sports Gambling Meets Prediction Markets at the Super Bowl (Feb. 7, 2026)
- Sports Gambling and the Taxation of Prediction Markets (Jan. 17, 2026)
