KEY TAKEAWAYS
- Illinois is barred from enforcing its event contracts licensing and taxation law for the time being.
- A federal judge granted preliminary injunctions to parties including Kalshi, the CFTC, and Coinbase, who sued the state over its attempted enforcement measures against prediction markets.
- Illinois officials appealed to the Seventh Circuit, where the Illinois cases join two separate prediction markets appeals in Wisconsin.
A new federal court preliminary injunction blocks Illinois from enforcing the prediction markets licensing and tax law state legislators passed in June.
In an order issued Friday, Oct. 30, Judge Martha Pacold wrote that Illinois officials including Attorney General Kwame Raoul cannot enforce state gaming laws, including the Sports Wagering Act, illegal gambling statutes, or the ‘Internet Wagering’ provisions of the Illinois Admin Code, on the trading of swaps, including sports event contracts, that are available via Commodity Futures Trading Commission-registered companies like Kalshi.
The decision combines three separate Illinois prediction markets cases:
- Coinbase v. Raoul et al.
- The CFTC, the Coalition for Fair Markets, and OG.com v. the state of Illinois et al.
- Kalshi v. Raoul et al.
Coalition for Fair Markets membership includes Kalshi, Polymarket, and Crypto.com.
SBC Americas reached out to the state Attorney General’s Office, but spokespeople declined to comment while the litigation is pending.
What is new Illinois prediction markets law?
The injunction’s prohibition on enforcement includes “licensing requirements, associated fees, taxes, and related criminal provisions, or by engaging in any criminal or civil enforcement actions, subpoena process, or other compulsory investigative process,” wrote Pacold.
Illinois’ approved 2026 budget package amended the state’s Sports Wagering Act to legally define sports “exchange wagers” as state-regulated sports betting. The measure required CFTC-registered exchanges to pay millions of dollars for state licenses, and introduced a per-wager tax starting at 1.75% on all sports event contract trading.
Kalshi sued Illinois in June, alleging the law constituted “a clear violation of the Supremacy Clause with respect to the regulation of event contracts.”
The CFTC previously sued Illinois in April, accusing the state of “aggressive and overzealous” attempts to curb prediction markets via actions such as cease-and-desist orders. The federal government agency subsequently amended its lawsuit to include complaints against the state’s new law.
Coinbase did similar with the lawsuit it filed against the state in December 2025.
The CFTC and prediction market operators similarly sued Kentucky in June after that state also passed a new law to attempt to license, regulate, and tax event contracts.
Why did Illinois judge grant injunctions to prediction markets?
Pacold’s Oct. 30 injunction order formalizes a decision she issued in early October.
In that reasoning last month, Pacold wrote that sports event contracts constitute swaps because underlying outcomes are “associated with a potential financial, economic, or commercial consequence.” She made that assessment while frequently referring to sports event contracts as “bets” in her written judgment.
The judge also opined that some Illinois state laws are likely preempted by the CEA. She also wrote that the prediction market plaintiffs demonstrated that they were likely to succeed on the merits of the case and that, in the meantime, they would be “irreparably harmed” without a preliminary injunction.
Illinois appeals join Wisconsin cases in Seventh Circuit
Raoul, Gov. JB Pritzker, and the Illinois Gaming Board (IGB) immediately appealed Friday’s preliminary injunction order to the U.S. Court of Appeals for the Seventh Circuit, requesting that the district court’s order be reversed and vacated.
The Seventh Circuit already has appeals pending from Wisconsin.
The CFTC filed with the appeals court after a Wisconsin judge denied the CFTC a preliminary injunction in July. That ruling determined that the commission had not shown that sports-event contracts qualified as swaps under the Commodity Exchange Act (CEA), and that CFTC permission to offer sports contracts does not guarantee their right to offer them in defiance of state gambling rules.
Separately last week, the Seventh Circuit court granted Kalshi’s request to appeal a May decision in which a judge allowed the Indian Gaming Regulatory Act (IGRA) claims by the Ho-Chunk Nation against the company to proceed.
