A U.S. federal judge has blocked Illinois from enforcing new rules against prediction-market platforms. District Judge Martha Pacold granted preliminary injunctions in cases involving KalshiEX, Coinbase and the Commodity Futures Trading Commission, holding that sports event contracts of the kind Kalshi offers likely qualify as swaps under federal commodities law rather than as gambling.
'Many of these financial instruments are probably swaps within the meaning of federal law. They are just swaps that people find entertaining,' Pacold wrote. Illinois sought to regulate prediction markets through its gambling legislation, with age limits at 21+, geographic restrictions and curbs on contract types. The judge said those requirements would have forced Kalshi to build a separate market for state residents under threat of criminal prosecution.
Kalshi sued in June after Illinois legislators folded anti-prediction-market measures into the state budget. The CFTC filed its own suit in April, accusing states of 'aggressive and excessive' attempts to restrict the market. That same month the state Gaming Board sent cease-and-desist demands to Kalshi, Polymarket, Crypto.com and Robinhood, accusing the companies of breaking gambling laws.
Tax question stays open
Pacold left unresolved the state tax on platform fees, set at 1.75% per sports event trade. 'Collecting a share of Kalshi's and Coinbase's profits may not create the same conflict as regulating the whole market,' she noted. The ruling contrasts with the position of the federal court in Wisconsin, which earlier refused the CFTC a similar injunction. The dispute between operators and states may end up at the Supreme Court.
