Kalshi has taken Illinois to court over a new state law that would force prediction market operators to obtain a local license before offering sports event contracts.
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Kalshi is not treating the Illinois law as a standard licensing dispute. The company argues that state oversight of sports event contracts clashes with federal derivatives law.
According to The Block, Kalshi filed suit against Gov. JB Pritzker, Attorney General Kwame Raoul and the Illinois Gaming Board. The complaint asks the court for declaratory relief, along with temporary and permanent injunctions.
Kalshi says Illinois cannot regulate contracts traded on federally regulated designated contract markets, or DCMs, because Congress gave that area to the federal government through the Commodity Exchange Act.
“It expressly violates the (Commodity Exchange Act’s) ‘exclusive jurisdiction’ provision by asserting concurrent state jurisdiction over sports events contracts traded on federally regulated DCMs; it intrudes on the field of exchange-traded derivatives that Congress has reserved entirely for the federal government; and it forces regulated entities to choose between violating federal or state law,” Kalshi wrote in the complaint.
Illinois folded prediction markets into its Sports Wagering Act through SB 3019. The state also added a tax on operators through the wider budget package signed by Pritzker on June 16.
The rules are due to take effect July 1, giving Kalshi only a short window to challenge the law before enforcement begins.
The legal issue is bigger than one state. Prediction markets have grown quickly through sports, politics, finance and cultural event contracts, while states and federal regulators continue to fight over where sports contracts fit. Kalshi wants the court to confirm that federally regulated exchange-traded contracts cannot be placed under state sports betting licensing rules.
Kalshi says the Illinois law would cause “irreparable” harm if the court does not block it.
The company argues it may need to add geofencing technology to stop Illinois users from accessing sports event contracts. Kalshi says those costs would not be recoverable even if it later wins the case.
Kalshi also claims the state licensing requirement could put it in conflict with CFTC rules. In its view, Illinois is forcing a federally regulated company to choose between state compliance and federal obligations.
The case now adds Illinois to the growing legal fight over whether prediction markets belong under gambling law, commodities law or both.