A federal ruling in Illinois has widened the disagreement over who regulates sports prediction markets, giving operators preliminary protection from state licensing requirements while other courts have allowed state enforcement. According to Bloomberg Law, Kalshi Inc., Coinbase Global Inc. and the US Commodity Futures Trading Commission obtained the injunction on Oct. 2 in the US District Court for the Northern District of Illinois.
Illinois breaks with other courts
Judge Martha M. Pacold found that the platforms and the Trump administration were likely to prevail on their argument that sports event contracts are hedging derivatives traded on federally designated markets. She also found that withholding preliminary relief would cause irreparable harm. Drawing on Seventh Circuit precedent, Pacold concluded that the federal Commodity Exchange Act likely displaces Illinois’ authority to determine which event contracts may be offered, where they may be sold and who may buy them. She left the treatment of taxes unresolved, requesting additional arguments on fee provisions.
That reasoning diverges from recent Sixth and Ninth circuit appellate decisions treating sports event contracts as bets rather than swaps and leaving them subject to state rules during litigation, Bloomberg Law reported. The Sixth Circuit also concluded that state gaming laws likely would not be preempted even if the contracts qualified as swaps. Within the Seventh Circuit, a Wisconsin federal judge has permitted state regulation of sports prediction markets as gambling. Gary Kalbaugh, a derivatives partner at Cahill Gordon & Reindel LLP, said the Illinois decision therefore creates a disagreement within that circuit, which has historically been viewed as receptive to CFTC-regulated markets.
Coinbase general counsel Molly Abraham welcomed the ruling as supporting CFTC oversight and continued access for Illinois consumers; the Illinois attorney general’s office declined to comment. The case is Coinbase Fin. Mkts., Inc. v. Raoul, N.D. Ill., No. 1:25-cv-15406, 10/2/26.
Supreme Court resolution could take time
The Supreme Court has already been asked to address whether sports prediction markets constitute betting or swaps trading, according to Bloomberg Law. Adrian King, co-leader of Ballard Spahr LLP’s gaming and state attorneys general teams, said conflicting decisions would continue to produce uneven operating conditions until the justices resolve the dispute. But much of the litigation remains at the preliminary-injunction stage, where courts weigh several factors—a procedural setting that may complicate Supreme Court review.
Melissa M. Blanco-Sandman, an appellate litigator at Obermayer Rebmann Maxwell & Hippel LLP, said accumulating decisions, increasingly developed legal arguments and relatively limited factual disputes could encourage earlier review. Dan Boyle, a commercial litigation attorney at Boies Schiller Flexner LLP, likewise described the dispute as principally a statutory-interpretation question, particularly concerning field preemption. Even if the Supreme Court agrees to hear a case soon, court watchers told Bloomberg Law that a decision might not come until 2028.
Meanwhile, the CFTC, led by its lone commissioner and Chairman Michael Selig, claims exclusive regulatory authority over prediction markets and proposed rules this summer that would permit most sports prediction markets currently available. President Donald Trump has family connections to the industry. Kalbaugh said the Supreme Court could request the views of Solicitor General D. John Sauer, who might recommend waiting for more lower-court decisions or completion of the administration’s rulemaking, potentially narrowing the questions before the justices.
What it means for prediction markets
- The Illinois protection is preliminary. It shields certain sports prediction markets from state licensing requirements while litigation continues, rather than finally settling their legal status.
- Access remains jurisdiction-dependent. The Illinois outcome conflicts with appellate decisions in the Sixth and Ninth circuits and a district-court ruling in Wisconsin.
- Federal oversight does not yet resolve every state issue. Pacold’s ruling left the tax question open, with further arguments needed on fee provisions.
- A nationwide answer may remain distant. Supreme Court review is not assured, a decision could take until 2028, and CFTC rulemaking could affect the arguments presented.