This paper establishes a theoretical foundation for the Consistent Boltzmann Algorithm (CBA) by deriving the limiting kinetic equation. The formulation is similar to the proof by one of the authors that the Boltzmann equation is the limiting kinetic equation for Direct Simulation Monte Carlo [W. Wagner, J. Statist. Phys. 66:1011 (1992)]. For a simplified model distilled from CBA, the limiting equation is solved numerically, and very good agreement with the predictions of the theory is found.