Illinois Appeals Prediction Market Regulation Rebuff
Jesse M. Cox Published 09/11/2026
The state of Illinois is appealing to the Seventh Circuit Court to overturn a lower-court ruling rebuffing the state's attempt to regulate prediction markets. U.S. District Judge Martha Pacold issued a preliminary injunction on October 30, barring the state from enforcing a new prediction markets licensing and tax law against Commodity Futures Trading Commission (CFTC)-regulated platforms.
The order blocks Illinois state officials from enforcing state gaming laws, including the Sports Wagering Act, against operators like Kalshi and Polymarket that are offering sports-event contracts. This new Illinois law proposes to enact a 3.5% regulatory levy on all event contracts offered in the state.
Illinois offers a rare victory for prediction market sites
If luck be a lady, then Dame Fortune is shining on prediction market sites in Illinois. The beleaguered legal team representing sites like Kalshi has suffered setback after setback in both state and federal court rulings.
However, Illinois is proving to be an oasis in this sea of despair. While several states have successfully gained injunctions preventing prediction market sites from offering sports-event contracts in their jurisdiction, Illinois was opting to take a different tack. The state gaming regulatory body set out to enforce a 3.5% levy on all revenue earned from event contracts played in Illinois.
However, Judge Pacold ruled that while event-contract trading offerings from prediction market sites like Kalshi and Polymarket are similar to what is offered by betting sites, these event contracts still fall under the sole jurisdiction of federal regulators.
Illinois was sued by the U.S. government
Last spring, the Illinois Gaming Board (IGB) sent cease-and-desist letters to Kalshi, Polymarket, and Crypto.com. It was the IGB's belief that these prediction market sites were violating Illinois gambling laws. Their offering of sports-event contracts left each of these sites involved in unlicensed sports wagering.
“It is unlawful to knowingly establish, maintain or operate an internet site that permits a person to play a game of chance or skill for money or other thing of value, or that permits a person to make a wager upon the result of any sport, game, contest, political nomination, appointment or election, via the internet without an IGB-issued license,” the cease-and-desist letters read.
In response, the U.S. government filed suit in Illinois in April on behalf of the prediction market sites.
Filed in Chicago federal court, the complaint argued that Illinois’ attempt to halt the offering of designated contract markets (DCM) regulated by the CFTC intrudes on the federal government’s exclusive authority to regulate these national swaps markets.
The suit named IGB officials, Governor JB Pritzker, and Attorney General Kwame Raoul as defendants.
Five appeals for the price of one
This battle is among five cases that the U.S. Court of Appeals for the Seventh Circuit is consolidating into one coordinated appeal process. These five pending prediction-market and sports-contract appeals feature three separate Illinois cases: Kalshi v. Raoul, Coinbase v. Raoul, and United States v. Illinois. This mass appeal also includes the CFTC v. Wisconsin and Ho-Chunk Nation v. Kalshi.
Each of these appeals concerns the same issue. That's whether state gambling laws apply to platforms like Kalshi, Polymarket, and Coinbase or if they are preempted by federal CFTC regulations.
- December 14, 2026: Illinois appellants' consolidated opening brief
- January 13, 2027: Appellees' briefs (including Kalshi, Coinbase, and the CFTC)
- February 3, 2027: Illinois appellants' reply brief (if any)