Summary
- Kalshi has filed a lawsuit against Illinois following the state’s implementation of a 15% tax on revenue generated from sports-related prediction market bets.
- This tax is scheduled to take effect on July 1, with the Trump CFTC taking legal steps to halt its enforcement.
- The lawsuit represents a continuing dispute nationwide regarding the classification of prediction markets as gambling versus regulated swaps.
On Wednesday, Kalshi initiated a lawsuit in federal court against the state of Illinois, asserting that the state lacks the authority to impose taxes on prediction markets.
Last week, Illinois Governor JB Pritzker enacted a new law that established a statewide tax on cryptocurrency transactions and initiated a “Sports Wagering Fund.” This fund, which is set to commence on July 1, will apply a 15% tax on the gross receipts from sports-related prediction market wagers.
By taxing these wagers, Illinois claims that sports-related prediction markets should be viewed as a form of state-regulated sports betting, differing from swaps that fall under the jurisdiction of the CFTC, an argument supported by industry leaders and the Trump administration.
Kalshi’s lawsuit contends that the state does not have the right to tax its income from sports-related activities, which it argues do not qualify as gambling revenue.
The complaint states, “As of July 1, 2026, Kalshi will face criminal penalties in Illinois unless it stops offering sports event contracts to Illinois residents, which are lawful under Kalshi’s exclusive federal regulator, or pays millions to Illinois and complies with the state’s regulations.”
This lawsuit follows the Trump CFTC's recent actions, which included modifying an ongoing lawsuit against Illinois to challenge the new tax. The CFTC has also sought a preliminary injunction to prevent the law from going into effect next week.
The disputes surrounding Illinois's tax are part of a broader conflict between state and federal authorities regarding prediction markets. The Trump administration has vigorously defended this growing sector, while both Republican and Democratic states have raised concerns, arguing that platforms like Kalshi and Polymarket are providing unregulated gambling services to individuals as young as 18.
Numerous lawsuits on this topic are currently active across nearly every federal jurisdiction, suggesting that the final resolution may reside with the U.S. Supreme Court.