Kalshi Sues Illinois Over 15% Tax on Prediction Markets Revenue
Kalshi sued Illinois over a new 15% tax on sports prediction market revenue.
Why it matters: This lawsuit raises critical questions about state taxation authority versus federal regulation over financial products. In-house counsel and legal ops must watch how this could affect compliance for prediction markets and similar platforms.
- Kalshi filed suit on June 24, 2026, contesting Illinois' 15% tax on gross receipts from sports prediction markets.
- Illinois' 2026 budget law also imposes a 0.2% tax on cryptocurrency transactions, funding a Sports Wagering Fund.
- Kalshi asserts the tax violates the U.S. Constitution’s Supremacy Clause, arguing the Commodity Futures Trading Commission (CFTC) has exclusive jurisdiction.
- On April 2, 2026, the CFTC and Department of Justice sued Illinois to block state gambling laws applied to federally licensed operators like Kalshi.
On June 24, 2026, prediction market operator Kalshi filed a federal lawsuit challenging Illinois' new 15% tax on gross receipts generated by sports prediction markets. This tax is part of Illinois' $56 billion state budget law enacted earlier in 2026, which also includes a 0.2% tax on cryptocurrency transactions. The revenue from the sports market tax finances a newly created Sports Wagering Fund.
Kalshi argues the tax conflicts with the U.S. Constitution’s Supremacy Clause, emphasizing that the Commodity Futures Trading Commission (CFTC) exclusively regulates prediction markets. The company’s complaint states Illinois “apparently deems itself unencumbered by the supremacy clause,” highlighting a direct clash between state taxation and federal regulatory authority.
This case builds on an ongoing legal confrontation. Earlier, on April 2, 2026, the CFTC and the Department of Justice filed a lawsuit against Illinois, seeking to block the state’s application of gambling laws to federally licensed Designated Contract Market operators, including Kalshi. In May 2026, a federal court in Arizona ordered Illinois officials to suspend prosecution of Kalshi, allowing it to continue offering wagers on political elections.
This dispute probes the boundaries of state powers to tax emerging financial and digital products operating under federal oversight. Its outcome could establish key precedents about states’ authority to impose taxes on federally authorized instruments, guiding legal and compliance strategies for prediction markets and similar platforms nationwide.
By the numbers:
- 15% — Illinois tax on gross receipts from sports prediction markets
- 0.2% — Illinois tax on cryptocurrency transactions included in 2026 budget law
- June 24, 2026 — Date Kalshi filed federal lawsuit
- April 2, 2026 — Date CFTC and DOJ sued Illinois
What's next: Watch for federal court rulings on both Kalshi’s and the CFTC/DOJ suits to clarify jurisdictional boundaries.