Key Highlights
- Kalshi filed a federal lawsuit against Illinois over SB 3019.
- The platform argues the law violates federal authority under the Commodity Exchange Act.
- Illinois’ new law would require prediction market operators to obtain gambling licenses.
KalshiEX LLC, a CFTC-regulated prediction market platform, filed a federal lawsuit on Tuesday, 2026, challenging Illinois’ newly enacted SB 3019, arguing the law unconstitutionally interferes with federal authority over event contracts traded on designated contract markets (DCMs).
In the complaint filed in the U.S. District Court for the Northern District of Illinois, Kalshi contends that SB 3019 violates the Supremacy Clause by attempting to regulate sports event contracts that fall under the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC) under the Commodity Exchange Act (CEA).
The law, signed by Governor JB Pritzker on June 16 and set to take effect July 1, 2026, amends Illinois’ sports wagering statutes to include “exchange wagers” on prediction markets and sports events. It requires operators like Kalshi to obtain a costly state gambling license and restrict trading to only Illinois residents, among other regulations. Non-compliance could expose Kalshi to criminal penalties.
Battle over regulatory authority
Kalshi argues the law directly conflicts with federal regulations. The CEA grants the CFTC exclusive jurisdiction over swaps and event contracts traded on federally designated DCMs. Kalshi, designated as a DCM since 2020, offers nationwide access to event contracts on economics, politics, weather, and sports.
The CFTC has permitted Kalshi to list sports event contracts and recently issued a detailed Notice of Proposed Rulemaking outlining federal oversight.
“SB 3019 impermissibly usurps the CFTC’s exclusive jurisdiction,” the complaint states. It forces Kalshi into an impossible choice: cease offering contracts to Illinois users (violating CFTC’s impartial access rules), pay millions for a state license and comply with restrictive gambling regulations, or face enforcement actions.
The lawsuit highlights that complying with Illinois’ residency requirement would breach CFTC regulations mandating uniform nationwide access. Kalshi warns of irreparable harm to its business, customer relationships, and reputation if forced to geo-block users or operate under conflicting rules.
CFTC has already sued Illinois
This is not the first clash. The CFTC itself sued Illinois earlier this year over SB 3019 and related gambling laws. Kalshi also cited favorable rulings in other jurisdictions, including a Third Circuit decision affirming preemption and preliminary injunctions in Arizona and Tennessee. Courts have repeatedly recognized that state gaming laws cannot reach CFTC-regulated DCMs.
The platform emphasizes that event contracts function as risk-management tools rather than traditional gambling. They enable hedging against real economic consequences from events, with prices reflecting market probabilities. The platform has partnered with institutions like Tradeweb and media outlets such as CNN and CNBC.
Illinois officials, including Attorney General Kwame Raoul and the Illinois Gaming Board, have previously issued cease-and-desist demands and supported other states’ efforts to regulate prediction markets. The complaint describes SB 3019 as the latest aggressive step in challenging federal supremacy.
State vs prediction markets
The suit seeks declaratory judgment and preliminary/permanent injunctions preventing Illinois officials from enforcing SB 3019 or related gambling laws against Kalshi. It names Governor Pritzker, Attorney General Raoul, and members of the Illinois Gaming Board as defendants in their official capacities.
The case underscores growing tension between states seeking to control sports betting and prediction markets and federal regulators protecting a uniform national framework for derivatives trading. With the July 1 effective date approaching, Kalshi is requesting emergency relief to maintain operations.
The outcome could have significant implications for the future of regulated prediction markets in the U.S., potentially affecting innovation in event-based financial products.
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