Kalshi sues Illinois over new tax on prediction market sports bets
Prediction market firm Kalshi has filed a lawsuit against the state of Illinois over a newly enacted tax targeting wagers on prediction market sports bets. The company argues the tax is unconstitutional and unlawfully interferes with interstate commerce.
Background
- Kalshi is a regulated U.S. prediction market where users bet real money on the outcome of events (e.g., elections, sports, economic data). It won a major legal victory in 2024 allowing it to operate under CFTC oversight, positioning it as a rival to unregulated platforms like Polymarket.
- Illinois passed a law taxing prediction-market wagers on sports outcomes at the same rate as traditional sports betting — a first in the U.S. Kalshi argues this treats its contracts as illegal gambling rather than regulated derivatives, and that it violates federal commodities law.
- The case tests whether states can regulate prediction markets as gambling, or whether they fall under exclusive federal jurisdiction (CFTC). The outcome could set a precedent for how prediction markets are taxed and regulated nationwide.