- A federal judge ruled that Illinois likely cannot enforce its sports betting license rules against Kalshi, and proposed wording for the injunction is due Oct. 29.
- The ruling leaves Illinois’ new transaction fee in place for now and conflicts with a Wisconsin decision that is on appeal at the Seventh Circuit.
CHICAGO – Kalshi and Illinois officials have until Thursday, Oct. 29, to send U.S. District Judge Martha Pacold their proposed wording for a court order.
The order comes from an Oct. 2 decision by Judge Pacold, who said Illinois likely can’t hold Kalshi to the state’s sports betting rules. Pacold wants both sides to agree on the exact terms before she signs off on it.
Pacold, a judge in the Northern District of Illinois, handled three lawsuits in one ruling. Kalshi, along with Coinbase and the Commodity Futures Trading Commission (CFTC), each sued Illinois officials after the Illinois Gaming Board sent cease-and-desist letters to prediction market companies, including Kalshi. The CFTC’s case started on April 2, when the agency sued Illinois, Arizona, and Connecticut over their attempts to regulate event contracts.
Pacold granted the requests for preliminary injunctions in part. Per the ruling, the sports contracts are most likely “swaps” under the Commodity Exchange Act. If that’s the case, then the CFTC regulates them, not Illinois. Pacold also pointed out that a swap is still a swap, even if people are using it to gamble.
What Will Kalshi’s Injunction Block?
If the order follows Pacold’s ruling, Illinois won’t be able to require a state sports wagering license or use its criminal gambling laws against Kalshi for the covered contracts. Without a state license, Kalshi does not have to follow the rules that sports betting sites in Illinois do, like only accepting customers who are 21 or older and physically located in the state.
According to Pacold, making Kalshi follow those rules would basically force it to set up a separate market just for people in Illinois.
The ruling didn’t cover every type of sports contract, which is why the wording of the order is important. A few things to watch for in the proposed order are:
- Pacold focused on championship contracts, such as whether the Cubs win the World Series.
- She said being listed on a federally registered exchange is not enough on its own to protect a contract from state law.
- Coinbase even admitted that a contract on the Gatorade color getting dumped on a coach would not qualify as a swap.
It’s not clear yet if single-game contracts, player props, or parlays will be included, and that will likely depend on the final order.
What Does the Ruling Leave Open?
The ruling also didn’t settle the fight over Illinois’ new fee. Illinois’ fiscal year 2027 budget added a tiered fee system for legal online prediction markets:
- 1.75% fee for the first 5 million sports-related wagers each year
- 3.5% fee for all wagers after the first 5 million
Pacold did not block the fee and asked for more arguments on it.
Pacold suggested Illinois might have better luck defending the fee, since taking a share of the companies’ profits isn’t necessarily the same as regulating the whole market.
Illinois could also appeal, but there has been no public report of an appeal yet. The office of Attorney General Kwame Raoul declined to make comment on the ruling.
How Does Illinois Conflict With Wisconsin?
Pacold’s ruling goes against a decision from just up the road. On July 29, U.S. District Judge William Griesbach in the Eastern District of Wisconsin refused to stop Wisconsin from enforcing its gambling laws against prediction markets. He said the CFTC had not shown that sports event contracts are likely swaps, which would mean that they must follow the same laws that legal sports betting sites in Wisconsin follow.
Both states are in the Seventh Circuit, so the same appeals court will eventually have to decide which judge got it right. Griesbach’s decision has already been appealed by the CFTC and Kalshi. Replies are due Nov. 12, and an oral argument date has not been set yet.
Other appeals courts are split, too. Kalshi won at the Third Circuit in April, but it lost at the Ninth and Sixth Circuits.
There’s no telling yet which way the Seventh Circuit will go. If it agrees with Griesbach, the Illinois injunction could be at risk, and Kalshi may have to follow the same rules in Illinois as other state-regulated legal sports betting sites.
