Kalshi and CFTC sue Illinois to block prediction market tax as state delays enforcement
Kalshi and the CFTC filed a federal lawsuit against Illinois over a new tax and licensing regime on prediction markets enacted in April as part of the state's fiscal year 2027 revenue omnibus. Illinois prosecutors agreed not to enforce the levy against Kalshi for now, providing temporary relief while the joint challenge proceeds. The suit argues that Kalshi's federally regulated event contracts are preempted from state sports wagering oversight.
The Illinois prosecutors' standstill agreement gives Kalshi breathing room, but the underlying lawsuit is what matters long-term. A federal ruling that CFTC registration does not preempt state tax-and-license regimes would let every state replicate Illinois's framework, forcing Kalshi and Polymarket to navigate 50 different gambling bureaucracies instead of one federal regulator.
The 15% gross receipts levy cited in related Michigan proceedings would immediately erode margins against untaxed offshore competitors. Kalshi's survival depends on winning this preemption argument in at least one federal court before more states file copycat statutes. The platform's legal team is now stretched across Kentucky, Minnesota, New Mexico, and Michigan's 14-day restraining order, and each additional front dilutes its chance of a clean victory.
Joins a multi-state fight over prediction market classification that has drawn in Kentucky, Minnesota, New Mexico, and Michigan, with each state testing whether CFTC registration shields platforms from local gambling enforcement.