Add Illinois to the growing list of states that are cracking down on online prediction markets.
The Illinois Gaming Board (IGB) issued three cease-and-desist letters earlier this week, sending them out to Kalshi, Robinhood and Crypto.com for “suspected illegal sports wagering.”
It’s just another chapter of an ever-evolving story for online prediction market firms, which have argued that they are federally regulated and need not conform to state-specific rules and regulations.
But it could also foreshadow changes coming for operators like Kalshi, especially after Nevada Rep. Dina Titus penned a letter to that very crutch those firms have leaned on — the Commodity Futures Trading Commission.
Another state labels Kalshi’s operations as illegal
In each C&D letter — to Kalshi, Robinhood and Crypto.com — the IGB noted that it “has reason to believe” each operator “is engaging in unlicensed sports wagering” that violates the Illinois Sports Wagering Act and Illinois Criminal Code.
According to state law, as the IGB made clear in its letters, “sports wagering” constitutes the acceptance of wagers on sports events, portions of those events or on individual statistics of athletes. That includes “any system or method of wagering.” As the board pointed out, only state-licensed entities can operate in the Illinois sports betting market.
The IGB “has neither licensed nor authorized” any of the three aforementioned firms. As such, the board wrote, their operations are illegal in Illinois.
The state regulator did not specify an exact date by which Kalshi, Robinhood or Crypto.com need to cease operations.
List of objectors to prediction markets continues to grow
Kalshi burst onto the scene just before the Super Bowl and has since expanded its offerings, particularly after partnering with Robinhood in time for March Madness. Crypto.com, meanwhile, has operated since late 2024.
In recent weeks, though, states have started to crack down on the predictions market. Nevada and New Jersey were first to send out cease-and-desist letters, the former to Kalshi and the latter to both Kalshi and Robinhood. Ohio followed suit late last week, adding Crypto.com to its list alongside Kalshi and Robinhood. For its part, Ohio expressed its concern that these three entities allow users to participate so long as they are at least 18 years old rather than the state-mandated 21 for sports betting.
(Both Massachusetts and Connecticut have made it public, too, that they have opened investigations into these platforms.)
Like Illinois, each state noted that those operators have essentially acted as sportsbooks in their respective jurisdictions despite not having a state-issued license. Kalshi, however, has gone on the offensive, emphasizing that prediction market firms operate under federal oversight and regulation.
How Kalshi has responded to state regulatory attempts
Kalshi filed lawsuits against Nevada and New Jersey, noting that regulators are “unconstitutionally threatening” to prohibit event trading.
Kalshi said in its Nevada suit that states attempting to regulate its operation “is preempted by federal law,” with the Commodity Exchange Act laying out a federal framework for commodity futures trading.
By taking action against the likes of Kalshi, Robinhood and Crypto.com, these states “seek to undermine … the authority granted by Congress to the Commodity Futures Trading Commission, which has safely and effectively governed commodities for decades.”
Titus, though, has started the process of attempting to change the way the federal government perceives event trading.
Titus: CFTC need to ‘exercise its authority’
Prior to Illinois’ cease-and-desist letters, Titus sent a letter to Christopher Kirkpatrick, Secretary of the Commission at the Commodity Futures Trading Commission (CFTC).
In it, the Nevada representative requested that the CFTC suspend sports event trading on platforms such as Kalshi, not only within the state of Nevada but throughout the country, urging the commission to “exercise its authority … to ensure this unlawful activity does not persist.”
Titus mentioned her previous comments, made in February, regarding public policy implications of operators offering prediction markets surrounding political and sports events. She has said that event-based contracts represent “a backdoor way” to go around state laws and regulations without obtaining state-issued licenses.
While the CFTC has been silent on the matter, at least publicly, Titus’ letter indicated that the commission has started the process of collecting additional information regarding prediction markets, allowing the body to adjust future regulatory actions. However, Titus said, “the Commission also has a responsibility to enjoin entities under its regulatory purview from actively violating the laws” as that process continues. Therefore, she noted, citing the Commodity Exchange Act, I request contracts related to political and sports events be stayed.”
“It seems clear,” Titus added, “that Kalshi’s, and similar platforms’, intent is not only to disregard the Commission’s process and procedure but also circumvent state abilities to regulate and tax gaming.”
The American Gaming Association issued a statement supporting Titus’ efforts. Chris Cylke, senior vice president of government relations for the AGA, emphasized that “CFTC intervention is clearly needed to stop these platforms from offering nationalized sports betting to anyone 18 years or older with an internet connection.”
Is federal government more friendly to prediction markets?
Again, with the CFTC remaining largely silent on the matter, the immediate future of prediction markets remains unclear for now. That said, at the federal level, one could infer some support for operators like Kalshi and Crypto.com.
Many have perceived the Trump administration as more friendly to prediction markets. The president’s son, Donald Trump Jr., is a paid strategic advisor for Kalshi. Brian Quintenz, who has worked with both Crypto.com and Kalshi, has been tapped to lead the CFTC.
What’s more, according to Bloomberg, Eliezer Mishory — Kalshi’s top lawyer who was named in Illinois’ cease-and-desist letter — has moved on to lead the Department of Government Efficiency at the US Securities and Exchange Commission.
