Additionally, getting the state license would have cost Kalshi $15 million for the first four years, then $1 million annually. Kalshi—valued at $22 billion—considers the license too “costly and burdensome,” the complaint said.

Kalshi wants exclusive CFTC oversight

Specifically, Kalshi sued to block Illinois from requiring the platform to obtain the expensive sports betting license, verify that bettors are located in the state, and pay additional taxes.

The company has alleged that states like Illinois are overstepping in attempting to regulate prediction markets as if they were sports wagering operators. Instead, a federal agency, the Commodity Futures Trading Commission (CFTC), has exclusive authority to regulate Kalshi, the platform argued.

Further, Kalshi alleged that complying with Illinois law and restricting residents there would violate the CFTC’s requirements to provide uniform access nationwide to its platform.

Without the court’s intervention, Kalshi will be forced to choose between violating state or federal law, the platform argued. It has asked the court to clarify that the CFTC alone can regulate prediction markets and to order a preliminary injunction stopping Illinois from lumping Kalshi in with traditional betting platforms like FanDuel.

Without an injunction, Kalshi may face civil and criminal penalties, the platform said. According to Kalshi, complying with Illinois law—and a patchwork of state laws that could follow—would also require the platform to invest in expensive “technological solutions to limit access.” And there’s no guarantee that Illinois would grant the license, threatening irreparable harms, including income and reputation loss, Kalshi argued.

What is a sports bet according to Kalshi?

The key fight that Kalshi and other prediction markets must win is over the legal definition of sports betting.

Kalshi’s lawsuit comes after the CFTC sued Illinois in April. In that complaint, the CFTC alleged that what Illinois defined as illegal sports bets on Kalshi were rather permissible “swaps” on “directives contracts” known as “event contracts” that the CFTC allows, so that stakeholders can hedge their risks when navigating uncertain but financially significant events.