Kalshi, described as a large prediction market entity, filed a federal lawsuit in Chicago to block a new Illinois tax on prediction markets. The suit challenges legislation that imposes transaction taxes ranging from 1.75% to 3.5% on every 'exchange wager' beginning next month, according to the Chicago Sun-Times. State lawmakers voted to impose the tax, which applies to events traded on prediction markets that have seen rapid growth in popularity recently.

Illinois state gambling regulators have described prediction markets as illegal sports betting, according to the Chicago Sun-Times. In contrast, Kalshi and the Trump administration’s Commodity Futures Futures Trading Commission (CFTC) maintain that event contracts traded on prediction markets do not constitute gambling and can only be regulated by the federal government. The CFTC sued to block state-level regulation efforts in Illinois, Arizona, and Connecticut earlier this year, also reported by the Chicago Sun-Times.

Illinois is a significant location in the dispute regarding the taxation of prediction market sports bets. The legal action represents the latest development in the conflict between state authorities seeking to tax these transactions and federal regulators asserting exclusive jurisdiction over the contracts.