Kalshi Illinois Gambling-Loss Suit: Stay Denied Sept 17

The gambling-loss recovery suit against Kalshi in the Northern District of Illinois will not be paused: Judge Matthew F. Kennelly denied a stay on September 17, 2026, even though seven federal appeal courts already hold the same preemption question and the Supreme Court has been asked to take it. The plaintiff, not Kalshi, was the one asking for the pause. The judge denied it in a one-paragraph minute entry because "there is a reasonable probability that this matter may be resolved on issues unrelated to the preemption issue referenced in the motion", and set briefing to finish on October 19. No court has ruled on preemption in this case, and no sweepstakes casino is a party to it.

The case is Lavery v. Kalshi Inc., No. 1:25-cv-14184, against Kalshi Inc., KalshiEX LLC, Kalshi Trading LLC and Kalshi Klear LLC, per the caption on the motion itself. We read both filings below, and all 43 docket entries, directly from the court record on September 18, 2026.

What did the judge actually decide?

Only the timetable. The September 17 minute entry denies the stay, grants the alternative request for more time, and resets the clock:

1. October 5, 2026 - the plaintiff's response to Kalshi's motion to dismiss is due.
2. October 19, 2026 - Kalshi's reply is due and briefing closes.
3. October 29, 2026 at 8:55 AM - the telephonic status hearing, moved from October 15.

The reason the court gave is the interesting part. The stay motion asked the judge to wait for the appeal courts on whether the Commodity Exchange Act displaces state gambling law. The judge's answer was that this case may well be decided on something else entirely.

The docket says what that something else probably is. Kalshi's pending motion is captioned as a motion to dismiss for failure to state a claim "and for Lack of Pendent Personal Jurisdiction", and pendent personal jurisdiction is the doctrine that decides whether an Illinois court can hear the Massachusetts, Kentucky and Georgia counts at all. That is a threshold question with nothing to do with the Commodity Exchange Act. A judge who can throw out three of the four claims on jurisdiction, and test the fourth against Illinois pleading rules, never has to say a word about preemption.

That is a scheduling ruling, not a merits ruling. It does not say state loss-recovery statutes survive preemption. It says this particular case does not need to wait to find out.

Who asked for the pause, and why does that matter?

The plaintiff did, which is the reverse of the usual shape. Mark T. Lavery filed the motion on September 16, 2026 under the court's inherent authority to control its docket, citing Landis v. North American Co., 299 U.S. 248 (1936).

His argument, as filed, is that the preemption question "is novel, is percolating up to federal courts of appeals around the country, and is likely to the Supreme Court", and that a stay "will cost Kalshi nothing it has not already told another court it wants". The motion states that four days before it was filed Kalshi had asked a different district court in the same circuit for a stay while it sought an interlocutory appeal, and that the Wisconsin court agreed, citing Ho-Chunk Nation v. Kalshi Inc., No. 25-cv-698-wmc (W.D. Wis. Sept. 11, 2026). We reported that Wisconsin certification and stay when it happened. Those characterisations are the plaintiff's, taken from his own brief; the Illinois judge did not adopt them.

The two rulings are not in conflict, and the difference is worth being exact about. In Wisconsin, Judge Conley had already decided the preemption question against Kalshi and then certified that same ruling for interlocutory appeal under 28 U.S.C. 1292(b); staying the case meant waiting on an appeal from an order in the case itself. Judge Kennelly has decided nothing on preemption and has a motion in front of him that may not require him to. One judge paused a case whose central question was already on its way upstairs. The other declined to pause a case that may never need the answer.

What is the Illinois lawsuit against Kalshi about?

The operative amended complaint, filed August 6, 2026, pleads claims under the gambling loss-recovery statutes of four states: Illinois (720 ILCS 5/28-8), Massachusetts, Kentucky and Georgia. Those are old statutes that let a loser, or in some states a third party, sue to recover money lost at gambling. Where sweepstakes casinos themselves stand in the other three is set out on our Massachusetts, Kentucky and Georgia legality pages.

Kalshi moved to dismiss on August 31, 2026 under Rules 12(b)(2) and 12(b)(6), arguing among other things that the Commodity Exchange Act expressly, impliedly and by conflict preempts every count because the contracts are "swaps" traded on a CFTC-designated contract market. Its brief relies principally on KalshiEX LLC v. Flaherty, 172 F.4th 220 (3d Cir. 2026), and acknowledges that the Ninth Circuit has reached the opposite conclusion. It asks for dismissal with prejudice. One of its attachments is a class action complaint filed in the Southern District of New York.

An earlier round went Kalshi's way: on July 13, 2026 the same judge granted a first motion to dismiss and denied jurisdictional discovery, but let the plaintiff replead. That opinion did not reach preemption. We covered the dismissal and the repleading standard it set.

Where does the preemption question stand right now?

Seven courts of appeals already have it, an eighth has been asked to take it, and a cert petition is pending on top. We counted the appellate dockets when the Iowa appeal opened on September 15, and this is that census brought forward:

The plaintiff's motion named only some of these. The Fourth and Sixth Circuit rows come from that motion; the Second, Tenth and Eighth come from our own docket sweep. A Kalshi appeal in the D.C. Circuit is against the CFTC rather than a state, so it is not in this count.

Why should a sweepstakes player care about a prediction-market case?

Because the loss-recovery statute is the weapon, and it points at more than one target. Illinois's 720 ILCS 5/28-8 is the same class of state law that shell plaintiffs have aimed at sweepstakes operators: Kentucky's version of it is what a recovery company used against Zula Casino's operator, and that case was dismissed on August 18 for lack of standing without ever testing whether sweeps play is gambling. The defence Kalshi is running here is a federal-preemption version of the argument the whole "this is not gambling" sector leans on. A sweepstakes casino has no CFTC licence and no exchange, so none of the Commodity Exchange Act reasoning transfers to one directly. What transfers is the pattern: a company arguing that a federal framing displaces a state's own definition of a bet.

Nothing decided this week changes where you can play or what any operator owes you. If you want the current state of the law rather than the litigation, our guide to whether sweepstakes casinos are legal sets out how the states actually answer that question, our Illinois state page tracks that state specifically, and our ranked list of sweepstakes casinos is the practical end of it.

Sources & documents

• Lavery v. Kalshi Inc., No. 1:25-cv-14184 (N.D. Ill.), docket, read September 18, 2026, for the entry list, the July 13, 2026 and August 3, 2026 orders, the August 6, 2026 amended complaint at entry 40, and the caption of entry 41, which names "Lack of Pendent Personal Jurisdiction" and attaches the Southern District of New York class action as Exhibit A
• Plaintiff's motion to stay proceedings, Dkt. 42, filed September 16, 2026, for the Landis authority, the four-state claim list, the description of Kalshi's Wisconsin stay request and the circuit-split summary. Every characterisation of Kalshi's position in that document is the plaintiff's own
• Notification of docket entry, Dkt. 43, entered September 17, 2026, for the denial, the quoted reason and the October 5, October 19 and October 29 dates
• Northern District of Illinois public ECF feed, which time-stamped the order at 13:11:37 GMT on September 17, 2026 and is how we found it

Both PDFs were retrieved from the court's public archive on September 18, 2026. All quotations are verbatim from the filing they are attributed to. Kalshi has published no statement on the September 17 entry that we can find, and nothing here alleges that any company has broken any law. This is not legal advice.

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