Kalshi Takes Legal Action Against Illinois Over New Tax on Sports Prediction Markets

Kalshi Challenges Illinois Tax on Prediction Markets

Kalshi has taken legal action against Illinois in response to a new 15% tax on revenues from sports prediction markets, which is set to begin on July 1. The company argues that the state does not have the legal authority to impose this tax.

The tax is part of a law enacted by Governor JB Pritzker, who also established a “Sports Wagering Fund” aimed at regulating sports betting within the state. The Illinois government contends that sports prediction markets should be classified similarly to regulated sports betting rather than as swaps overseen by the Commodity Futures Trading Commission (CFTC).

Kalshi asserts that its income from sports-related contracts should not be taxed as gambling revenue. As outlined in the lawsuit, the company faces potential criminal penalties if it continues to offer these contracts to Illinois residents without either adhering to state regulations or ceasing operations in Illinois entirely.

This lawsuit coincides with actions by the CFTC, which has also challenged the legality of the new tax and sought a preliminary injunction to prevent its enforcement. The ongoing legal battle highlights a significant national disagreement over the status of prediction markets, with both the Trump administration and industry leaders supporting Kalshi's position against state taxation.

Currently, several lawsuits concerning similar issues are progressing in various federal jurisdictions, indicating that a definitive resolution may ultimately require intervention from the U.S. Supreme Court.