Illinois Cannot Enforce Prediction Market Laws

Federal Judge Martha Pacold has issued a preliminary injunction barring Illinois state officials from enforcing licensing, tax and penalty measures against prediction markets subject to CFTC oversight. The ruling, issued on Friday, favors Kalshi, Coinbase and the CFTC and covers sports event contracts. The injunction formalizes Pacold's preliminary decision from early October. It also covers related fees and taxes, along with this ruling dated October 30.

The injunction also covers the new tax and regulatory framework that Illinois adopted in its FY2027 budget. The framework imposes a 1.75 percent transaction tax on exchange trades, raises the rate to 3.5 percent once the number of transactions exceeds five million, and requires prediction markets to obtain a sports wagering license. Pacold's earlier ruling left the tax question unresolved, stating that states may generally tax activities regulated at the federal level.

The ruling does not end the case, and the legality of sports event contracts remains disputed. Illinois officials have taken the decision to the Seventh Circuit Court of Appeals. Five cases are pending before the appeals court, three from Illinois and two from Wisconsin. The Wisconsin cases include an appeal against the CFTC's preliminary injunction request, which was denied in July, and an appeal against Kalshi's May ruling that allowed the Ho-Chunk Nation's IGRA claims to proceed.

Developments in Utah, however, are pushing operators to pull back. After Utah filed criminal complaints against Kalshi and its founders last week, at least four operators restricted their prediction market offerings in the state. PrizePicks updated its terms on Wednesday, the day Utah filed its complaint, and now allows only its daily fantasy sports product, Player Picks, in the state.