Kalshi Enjoys a Rare Court Victory
Jesse M. Cox Published 05/10/2026
An Illinois federal judge granted partial preliminary injunctions to prediction market sites Kalshi and Coinbase, and the Commodity Futures Trading Commission (CFTC) in a dispute over sports-event contracts. This court ruling will prevent Illinois gaming regulators from enforcing licensing requirements and related criminal penalties against Kalshi's sports-event contracts. However, the issues of licensing fees and wagering fees remain unresolved.
It was a rare court victory for Kalshi. It came in the same week that a Sixth Circuit Court judge ruled that Kalshi must geofence its sports-event contracts in Ohio and Tennessee. Kalshi has suffered similar court setbacks in Michigan, Nevada, and Wisconsin.
A federal judge rules that what Kalshi offers are swaps
The Illinois government argues that prediction market sports-event contracts are illegal sports betting. The opinion written by U.S. District Judge Martha M. Pacold disagrees with that assessment. She supports the claim that what Kalshi offers through its sports-event contracts is derivative swaps.
"Many of the financial instruments at issue are likely swaps as defined by the Commodity Exchange Act," Judge Pacold wrote. "They just happen to be swaps that people find entertaining and fun."
Judge Pacold also sided with the prediction market sites and the CFTC that the federal regulator likely supersedes the state regulator's laws.
"Under the Act and precedent interpreting it, some Illinois law is likely preempted," she wrote. "Plaintiffs are therefore likely to succeed—at least in part."
Judge Pacold's ruling was also agreeing that the argument from the prediction market sites that they would be suffering harm without the injunction was also a legitimate concern. She felt that requiring sites like Kalshi to create specific regulations to meet the Illinois requirements for age, geographic, and trading restrictions would impinge on the uniformity created by federal regulations.
"Plaintiffs have also demonstrated that they will be irreparably harmed without an injunction, and that the other equitable factors favor issuing an injunction," Judge Pacold wrote in her ruling.
The court is waiting to determing the precise terms of the injunction
Not every issue was settled with the writing of Judge Pacold's opinion. She left open the decision about how to deal with state licensing and wagering fees.
Judge Pacold set two dates for later this month at which the two sides are to come back with answers on these issues. "By October 29, 2026, the parties shall confer and file a proposed injunction consistent with this opinion and Fed. R. Civ. P. 65," she wrote. "Meanwhile, parties shall file a joint status report suggesting a proposed schedule for supplemental briefing on the issue of fees by October 8, 2026."
Kalshi originally filed suit against Illinois in June
Kalshi filed suit against Illinois in June. Lawyers for the prediction market site made the argument that all event contracts offered on prediction markets should be under the exclusive regulatory control of the CFTC. Illinois countered that Kalshi should be subject to the same state licensing fees, wagering taxes, and state regulatory rulings as every sports betting site operating in the state.
A recent ruling in a Wisconsin Federal Court went in the opposite direction. Judge William C. Griesbach ruled that the CFTC hadn't proven that sports-event contracts qualified as swaps. That case is currently on appeal in the Seventh Circuit Court.
Previous court rulings covering Ohio, Tennessee, Michigan, and Nevada have all gone in favor of the state regulators. These rulings are now requiring Kalshi to geofence its sports-event contracts in each of those states.