Federal Injunction Bars Illinois from Enforcing Prediction Market Licensing and Taxes
Judge Martha Pacold's injunction prevents Illinois from imposing licenses, taxes, or enforcement on CFTC-regulated prediction markets. The order covers the state's 1.75%-3.5% tax framework. Major operators have simultaneously restricted offerings in Utah due to Kalshi litigation.
SCCG Take — The Seventh Circuit consolidation signals prolonged uncertainty that favors operators with federal alignment but pressures state regulators to refine enforcement approaches.
A federal judge has blocked Illinois officials from enforcing gambling laws against CFTC-regulated prediction markets. U.S. District Judge Martha Pacold issued the preliminary injunction on Friday, formalizing her early October ruling in favor of Kalshi, Coinbase, and the CFTC. The order prohibits licensing requirements, associated fees, taxes, criminal and civil enforcement actions, subpoenas, and compulsory investigations related to swaps and sports event contracts.
The injunction specifically blocks application of Illinois’ FY2027 budget framework, which imposed a 1.75% transaction tax on exchange wagers rising to 3.5% after five million transactions and required a sports betting license. Pacold’s prior ruling had left the taxation question open, noting states may generally tax federally regulated activities, but the latest order expressly includes fees and taxes among barred measures.
Illinois has appealed to the U.S. Court of Appeals for the Seventh Circuit. Five prediction market cases now sit before that court, including three from Illinois and two from Wisconsin. The Wisconsin matters involve the CFTC’s appeal of a denied preliminary injunction and Kalshi’s appeal of a ruling allowing Ho-Chunk Nation IGRA claims to proceed.
Operators Restrict Prediction Market Activity in Utah
DraftKings, FanDuel, Fanatics, and PrizePicks have limited event contract offerings in Utah amid the state’s escalated legal action against Kalshi, including criminal charges filed last week. PrizePicks updated its terms on Wednesday to offer only daily fantasy sports Player Picks. DraftKings notified users it would provide only certain financial event contracts. FanDuel withdrew sports, politics, and novelty contracts, leaving financial ones. Fanatics is expected to stop accepting trades November 4.
These developments, as reported by Gambling Insider, underscore the fragmented state-level challenges facing prediction market operators while federal litigation continues.
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