Pending Litigation · No Ruling Yet
This article describes a federal complaint Kalshi filed against Illinois officials. The legal arguments summarized below are Kalshi's contentions; the court has not yet ruled, Illinois has not yet responded in this article, and nothing has been decided. This is a regulatory dispute, not a consumer class action — there is no settlement and nothing to claim. This page is informational and is not legal advice.
A week before a new Illinois law was set to treat prediction-market sports contracts as gambling, Kalshi went to federal court to stop it — setting up a direct test of whether states or Washington get to regulate the booming prediction-market industry.
What Is This About?
On June 23, 2026, the prediction-market operator KalshiEX LLC filed a lawsuit in the U.S. District Court for the Northern District of Illinois against Illinois Attorney General Kwame Raoul, Governor JB Pritzker, and the members and administrator of the Illinois Gaming Board, all in their official capacities. The case is captioned KalshiEX LLC v. Raoul, No. 1:26-cv-07363 (N.D. Ill.).Kalshi is asking the court to declare that Illinois cannot enforce a newly enacted law, SB 3019, against its federally regulated exchange, and to issue a temporary restraining order and preliminary and permanent injunctions blocking enforcement. According to the complaint, the relevant provisions of SB 3019 take effect on July 1, 2026.
What SB 3019 Does
Kalshi's complaint describes SB 3019 as amending the Illinois Sports Wagering Act to fold prediction markets into the state's gambling regime. The law expands the definition of "sports wagering" to include an "exchange wager," described in the complaint as an agreement, contract, transaction, or swap that is offered, traded, or executed on a prediction market or exchange and tied to a sporting contest or event.As Kalshi reads the statute, the practical effect is that an exchange cannot offer sports event contracts in Illinois unless it obtains a state sports-wagering license — which the complaint says costs millions of dollars — and complies with a range of state gambling rules. Among them, Kalshi points to a requirement that a licensed operator may accept wagers only from a person physically located in the state, along with state age requirements. The complaint notes that failing to comply could expose the company to civil and even felony criminal penalties under Illinois law.
Kalshi's Legal Argument: A "Swap," Not a "Bet"
The heart of Kalshi's case is the Supremacy Clause of the U.S. Constitution and the federal Commodity Exchange Act ("CEA"). Kalshi operates a federally designated contract market (a "DCM") that the Commodity Futures Trading Commission ("CFTC") authorized in 2020. The complaint argues that the CEA gives the CFTC "exclusive jurisdiction" over event contracts traded on DCMs, and that the CEA defines a "swap" broadly enough to cover event contracts — including those tied to sporting events.From there, Kalshi argues that Illinois is trying to regulate something Congress reserved for the federal government. It also points to a direct conflict: CFTC rules require a DCM to provide "impartial access" to its markets nationwide, while SB 3019 would require Kalshi either to cut off Illinois residents or to serve only Illinois residents within the state — either of which, Kalshi says, would violate the federal access rule. The complaint frames this as an "impossible choice" between breaking federal law and breaking state law.
Kalshi also notes that the CFTC itself has already sued Illinois over the same dispute (United States v. Illinois, No. 1:26-cv-3659 (N.D. Ill.)), and that in June 2026 the CFTC issued a lengthy Notice of Proposed Rulemaking laying out a federal framework for sports event contracts on prediction markets.
Why This Case Matters: The Third Circuit Precedent
Kalshi's filing leans heavily on a recent appellate win. In KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), the U.S. Court of Appeals for the Third Circuit upheld a preliminary injunction in Kalshi's favor against New Jersey, reasoning that because Congress gave the CFTC exclusive jurisdiction over trades on DCMs, the CEA preempts state law from reaching Kalshi's CFTC-licensed exchange.The complaint also cites federal district court rulings enjoining state enforcement in Arizona and elsewhere, while acknowledging that some courts (in Maryland, Nevada, and Ohio) declined to grant Kalshi preliminary relief — decisions Kalshi says it has appealed. In other words, the question of whether prediction markets are federal "swaps" or state-regulated gambling is being litigated across the country, and courts have not all agreed. The Illinois court is not bound by the Third Circuit's decision.
The Bigger Fight Over Prediction Markets
The Illinois suit is one front in a much larger legal war over prediction markets. State attorneys general, tribal gaming authorities, and several state legislatures argue that platforms such as Kalshi and Polymarket are operating as unlicensed sportsbooks that sidestep state consumer-protection and gambling laws. Platforms counter that their event contracts are legitimate, federally regulated financial instruments used to hedge real-world risk.That same debate is playing out in private litigation too. In June 2026, a proposed class action accused Robinhood — which offers Kalshi-sourced contracts through its Prediction Markets Hub — of running illegal, unlicensed sports gambling. See our coverage of the Robinhood prediction markets gambling class action. For the broader picture of the lawsuits and regulatory scrutiny facing the company, see our overview of Kalshi's 2026 legal challenges.
What Happens Next
Because SB 3019's relevant provisions are set to take effect July 1, 2026, the immediate question is whether the court will grant emergency relief. Kalshi has asked for a temporary restraining order and a preliminary injunction to keep Illinois from enforcing the law while the case proceeds. Illinois officials, who have publicly described prediction markets as gambling under state law, are expected to defend the statute.Key things to watch: whether the court issues a preliminary injunction, how it weighs the Third Circuit's Flaherty reasoning, and how Kalshi's case interacts with the CFTC's parallel suit against Illinois. The outcome could help decide whether a single federal regulator — or 50 separate states — governs prediction markets.
What This Means for Consumers
For everyday users, this is a legal story to follow, not a claim opportunity. There is no settlement, no class action for consumers, and no claim form connected to this case. If you trade on Kalshi from Illinois, watch for any court order or company announcement about access changing on or after July 1, 2026.More broadly, the prediction-market industry's success in arguing that its contracts are federal commodities has a flip side for users: it can bring federal commodities-fraud and insider-trading rules into play. Regulators and prosecutors have signaled that using nonpublic corporate, government, or confidential workplace information to trade on these markets can draw federal scrutiny.
Read the Complaint
You can read Kalshi's federal complaint against Illinois here:Kalshi v. Illinois — Complaint for Injunctive and Declaratory Relief (PDF, June 23, 2026)
Frequently Asked Questions
Why is Kalshi suing Illinois?
Kalshi filed a federal lawsuit on June 23, 2026 asking the court to block Illinois SB 3019, a new law that would require prediction-market operators to obtain a state sports-wagering license to offer sports event contracts. Kalshi argues the federal Commodity Exchange Act gives the CFTC exclusive jurisdiction over event contracts traded on its federally designated exchange, so the state law is preempted by the Supremacy Clause.
What is Illinois SB 3019?
SB 3019 amends the Illinois Sports Wagering Act to treat an "exchange wager" — a contract or swap tied to a sporting event that is offered on a prediction market or exchange — as sports wagering. As Kalshi describes it, that would bar exchanges from offering sports event contracts in Illinois unless they obtain a state gambling license and follow state rules, including accepting trades only from people physically located in the state. Kalshi says the relevant provisions take effect July 1, 2026.
Is there a settlement or claim form in this case?
No. This is a regulatory dispute between Kalshi and Illinois officials over whether a state law is preempted by federal law. It is not a consumer class action, there is no settlement, and there is no claim form. Nothing is available to claim.
What did the Third Circuit decide in the Kalshi case?
In KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), the U.S. Court of Appeals for the Third Circuit upheld a preliminary injunction in Kalshi's favor against New Jersey, reasoning that Congress gave the CFTC exclusive jurisdiction over trades on federally designated contract markets and that the Commodity Exchange Act preempts state law from reaching those trades. That ruling is persuasive but not binding on the Illinois federal court.
Does this lawsuit affect everyday Kalshi users in Illinois?
Possibly. If SB 3019 takes effect and is enforced, Kalshi says it may have to stop offering sports event contracts to Illinois residents or change how it operates in the state. The court has not yet ruled, so Illinois users should watch for any preliminary injunction or enforcement decision rather than assume access will or will not change.
Sources
- KalshiEX LLC v. Raoul, Complaint, No. 1:26-cv-07363 (N.D. Ill. June 23, 2026)
- KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026)
- United States v. Illinois, No. 1:26-cv-3659 (N.D. Ill.)
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