A U.S. federal judge has blocked Illinois from enforcing several new rules against prediction-market platforms, finding that sports event contracts offered by companies such as Kalshi likely qualify as swaps under federal law.
U.S. District Judge Martha Pacold granted preliminary injunctions in cases involving KalshiEX, Coinbase and the Commodity Futures Trading Commission (CFTC), finding that some Illinois laws are likely preempted by the federal Commodity Exchange Act.
“Many of the financial instruments at issue are likely swaps as defined by the Commodity Exchange Act — they just happen to be swaps that people find entertaining and fun,” Pacold wrote.
Illinois had sought to regulate prediction markets through its gambling framework, including restrictions on what contracts could be sold, where they could be offered and who could trade them. The state’s rules also required companies to block traders younger than 21 and imposed restrictions on sports offerings.
Pacold still signaled she’s open to upholding the state tax on transaction fees, which were originally scheduled to take effect in July. “The other laws Illinois seeks to enforce cause a conflict because they regulate what can be sold, as well as where it can be sold and to whom,” Pacold wrote.
The judge said Illinois’ age, geographic, and trading restrictions would force Kalshi to build a market solely for Illinois residents under threat of criminal penalties.
Kalshi sued Illinois in June after state lawmakers included prediction-market measures in the state’s fiscal budget. The CFTC filed its own lawsuit in April, alleging that Illinois and other states had made “aggressive and overzealous” attempts to curb prediction markets.
Pacold said the plaintiffs were likely to succeed on the merits and had shown they would suffer irreparable harm without an injunction.
The ruling does not resolve the underlying cases. The parties must submit a proposed injunction consistent with Pacold’s opinion by Oct. 29.
Illinois’ proposed tax on prediction markets remains unresolved. The state planned to impose a 1.75% per-wager tax on sports event contract trading, along with licensing requirements that could cost millions of dollars.
“Taking a cut of Kalshi and Coinbase’s profits, without more, might not pose the same conflict as regulating an entire market,” Pacold wrote.
“The CFTC has never held that Kalshi’s contracts are impermissible gaming contracts. It has never ordered Kalshi to remove its contracts. And it also supports Kalshi’s position in this litigation,” she wrote.
Illinois Gaming Board Administrator Marcus Fruchter sent cease-and-desist letters to Kalshi, Polymarket, Crypto.com and Robinhood in April, alleging “illegal gambling in violation of Illinois law.”
The ruling contrasts with a decision by a Wisconsin federal judge, who previously denied the CFTC a preliminary injunction after finding the commission had not shown that sports-event contracts likely qualified as swaps. The broader dispute between prediction-market companies and state regulators could eventually reach the U.S. Supreme Court.
Beautiful. https://t.co/8qFF0LGP9Q
— Luana Lopes Lara (@luanalopeslara) October 2, 2026
Kalshi co-founder and Chief Operating Officer Luana Lopes Lara described Pacold’s ruling as “beautiful.”