Illinois Federal Court Grants Kalshi Partial Injunction on Sports-Event Contracts Classified as CFTC Swaps
U.S. District Judge Martha M. Pacold granted Kalshi, Coinbase, and the CFTC partial preliminary injunctions blocking state licensing rules on sports-event contracts likely CEA swaps. The Oct. 2 ruling diverges from a contrary Wisconsin decision now before the U.S. Court of Appeals for the Seventh Circuit, with fees left for further briefing.
SCCG Take — Federal preemption advances here but unresolved fees and judicial splits demand close monitoring by prediction market operators and regulators ahead of likely higher-court clarification.
A federal court in Illinois has granted partial preliminary injunctions to Kalshi, Coinbase, and the CFTC. The Oct. 2 decision by U.S. District Judge Martha M. Pacold blocks the state from enforcing sports-wagering licensing and related criminal provisions against certain event contracts traded on federally regulated exchanges. Questions around taxation and fees remain unresolved.
The ruling creates a direct contrast with a Wisconsin federal decision that denied a similar injunction. That case now sits before the U.S. Court of Appeals for the Seventh Circuit. Pacold limited her analysis to contracts on championship outcomes, such as whether the Chicago Cubs would win the 2026 World Series.
Contracts Likely Fall Under Federal Derivatives Oversight
Pacold determined that such contracts carry tangible economic consequences for broadcasters, arena operators, sponsors, and concession providers. This reasoning led her to conclude they qualify as swaps under the Commodity Exchange Act (CEA) and fall under exclusive CFTC jurisdiction when traded on designated exchanges. The opinion stated: “Swaps are swaps whether they are used to gamble.” It further noted that “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.”
The dispute originated with an Illinois Gaming Board cease-and-desist letter to Kalshi on April 1, 2025. Coinbase joined after a partnership announced in December 2025. The CFTC filed suit against Illinois and two other states on April 2. The court has directed parties to submit proposed injunction terms by Oct. 29.
Diverging Rulings Increase Pressure for Supreme Court Review
Pacold declined to block Illinois’ fee structure outright. The state’s fiscal 2027 budget imposes a 1.75% fee on an exchange’s first five million sports-related wagers and a 3.5% fee above that threshold, alongside existing gross-receipts and per-wager charges. The opinion observed: “Regulatory uniformity, however, does not necessarily entail uniformity in cost.” Additional briefing will address whether these fees effectively restrict federally approved market operations.
Similar cases have produced conflicting results in the Sixth, Third, and Ninth Circuits. Coinbase chief legal officer Paul Grewal stated: “The lower courts aren’t buying what each other is selling. This is precisely why we have a Supreme Court. Time for SCOTUS to step up.” According to reporting by World Casino News, the Illinois matter remains active. Operators face continued uncertainty until appellate courts or the Supreme Court resolve the preemption questions.
Reporting: World Casino News
Generated by SCCG’s automated editorial system from published source reporting. SCCG Management holds editorial responsibility.
Gaming, betting and prediction markets — the desk’s read, every weekday.
Subscribe →