Kalshi Sues Illinois Over Sports Prediction Market Tax

Kalshi Sues Illinois Over Prediction Market Tax

Kalshi filed a lawsuit against Illinois on Wednesday, asserting in federal court that the state lacks the authority to impose taxes on prediction markets.

The legal challenge comes after Illinois Governor JB Pritzker signed a bill into law last week. This legislation not only establishes a statewide tax on cryptocurrency transactions but also creates a “Sports Wagering Fund.” Beginning July 1, this fund will levy a 15% tax on the gross receipts derived from sports-related prediction market wagers.

In justifying the taxation of these wagers, Illinois has contended that sports-related prediction markets function as a form of state-regulated sports betting. This stance directly contradicts the argument put forth by industry leaders and the Trump administration, which maintain that these markets are swaps overseen by the Commodity Futures Trading Commission (CFTC) at the federal level.

Kalshi’s lawsuit argues that the state has no right to tax its sports-related income, asserting that such income does not constitute gambling-related revenue.

“On July 1, 2026… Kalshi will be subject to criminal penalties in Illinois unless it either ceases to offer Illinois residents sports event contracts that are perfectly lawful in the eyes of Kalshi’s exclusive federal regulator or pays Illinois millions of dollars and submits to the state’s regulatory regime,” the complaint states.

Kalshi’s legal action mirrors a move by the Trump CFTC, which last week amended an existing lawsuit against Illinois to protest the state’s new tax. The CFTC also filed a motion for a preliminary injunction, seeking to block Illinois from implementing the law next week.

These disputes over the new Illinois tax represent the latest development in an ongoing, nationwide jurisdictional battle between states and the federal government concerning the future of prediction markets. The Trump administration has actively supported the rapidly growing sector, even as both Republican and Democratic states argue that platforms like Kalshi and its competitor, Polymarket, are offering unregulated gambling to individuals as young as 18.

With lawsuits on this matter currently active in nearly every federal jurisdiction, the U.S. Supreme Court is likely to be the ultimate arbiter of this issue.