Kalshi Sues to Block Illinois 1.75%-3.5% Prediction Market Tax
Updated
Updated · Chicago Sun-Times · Jun 25
Kalshi Sues to Block Illinois 1.75%-3.5% Prediction Market Tax
3 articles · Updated · Chicago Sun-Times · Jun 25
Summary
Kalshi filed a federal suit in Chicago seeking to stop Illinois from imposing a 1.75% tax on each prediction-market trade, rising to 3.5% after 5 million event wagers, when the budget takes effect next month.
The company argues its event contracts are federally regulated derivatives rather than gambling, saying Illinois' levy violates the Constitution's Supremacy Clause by intruding on CFTC authority.
That fight follows April cease-and-desist letters from the Illinois Gaming Board to Kalshi, Polymarket, Crypto.com and Robinhood alleging illegal gambling, while the CFTC earlier sued to block state actions in Illinois, Arizona and Connecticut.
Illinois says prediction firms are trying to evade the rules and consumer protections applied to other wagering operators, though lawmakers did not count on revenue from the new tax in the budget signed last week.
As states and feds clash over prediction markets, is a Supreme Court showdown now inevitable to decide their fate?
As insider trading hits prediction markets, can AI and federal watchdogs effectively police these billion-dollar platforms?
Illinois’ $800 Million Prediction Market Tax: Kalshi Lawsuit Sets Stage for Federal vs. State Showdown
Overview
Illinois is about to enforce a new law on July 1, 2026, that targets prediction markets by imposing a state tax on sports-related contracts and claiming that platforms like Kalshi violate state gambling laws. In response, Kalshi has filed a federal lawsuit, arguing that Illinois is ignoring the U.S. Constitution’s supremacy clause, which gives federal law priority over state law. This legal battle highlights a broader conflict between state governments and federal regulators over who has the authority to oversee prediction markets. The outcome could significantly impact how these markets operate in Illinois and across the United States.