Illinois is currently barred from enforcing its licensing and taxation regulations related to prediction markets. A federal judge granted preliminary injunctions to several entities, including Kalshi, Coinbase, and the Commodity Futures Trading Commission (CFTC), in response to the state's enforcement actions intended to regulate prediction markets.
The Illinois Attorney General’s Office has filed an appeal with the Seventh Circuit, where this appeal will be combined with two other prediction market cases originating from Wisconsin. This action follows a federal court ruling on Friday, October 30, which blocked the enforcement of a newly passed prediction markets law by the Illinois legislature.
The ruling by Judge Martha Pacold confirms that Illinois officials, including Attorney General Kwame Raoul, cannot impose state gaming laws—such as the Sports Wagering Act—on the trading of swaps and sports event contracts provided by CFTC-registered entities like Kalshi.
This injunction stems from and merges three distinct cases involving prediction markets: Coinbase v. Raoul et al., CFTC, Coalition for Fair Markets, and OG.com v. the state of Illinois et al., and Kalshi v. Raoul et al. The Coalition for Fair Markets includes members like Kalshi, Polymarket, and Crypto.com.
Details from the injunction highlight its barring of enforcement on licensing requirements, fees, taxes, and any criminal or civil enforcement processes associated with prediction markets. The Illinois 2026 budget package had modified the Sports Wagering Act to classify sports "exchange wagers" under state-regulated sports betting, imposing substantial licensing fees and a per-wager tax starting at 1.75% on all sports event contracts.
Kalshi filed a lawsuit against Illinois in June, arguing that the new regulations infringed on the Supremacy Clause concerning the interstate regulation of event contracts. Earlier, the CFTC had taken legal action against Illinois in April, criticizing the state's methods of stifling prediction markets through cease-and-desist orders. These actions led the CFTC to update their lawsuit to reflect challenges against the new Illinois law.
The same situation unfolded in Kentucky, where the CFTC and prediction market operators filed a lawsuit following similar legislation.
The injunction issued on October 30 is a formalization of an earlier ruling from early October. In that ruling, Judge Pacold indicated that sports event contracts are considered swaps because their outcomes are linked to financial, economic, or commercial results. During this, she frequently referred to these contracts as "bets."
Furthermore, she noted that certain Illinois laws are likely overstepped by the Commodity Exchange Act (CEA), asserting that the prediction market plaintiffs have a strong likelihood of succeeding in court and would experience immediate and severe damage without the injunction.
In light of this ruling, Raoul, Governor JB Pritzker, and the Illinois Gaming Board have promptly appealed to the U.S. Court of Appeals for the Seventh Circuit to overturn the district court’s decision. This appeal coincides with other ongoing cases in Wisconsin and precedes a recent Seventh Circuit decision allowing Kalshi to appeal a ruling related to claims made against it by the Ho-Chunk Nation under the Indian Gaming Regulatory Act.
