Illinois takes prediction markets injunction fight to Seventh Circuit
State officials are appealing a federal judge's order blocking enforcement of Illinois' licensing and tax law against Kalshi and other event-contract platforms.
Illinois Attorney General Kwame Raoul, Governor JB Pritzker and the Illinois Gaming Board have filed an appeal with the Seventh Circuit appeals court, seeking to overturn a preliminary injunction that stops the state enforcing its new prediction markets licensing and taxation law, SBC Americas reported.
The appeal follows an order issued on Friday 30 October by Judge Martha Pacold of the federal district court, who formally barred Illinois from applying the Sports Wagering Act, the state's illegal gambling statutes and the Internet Wagering provisions of the Illinois Administrative Code to swaps trading offered through Commodity Futures Trading Commission-registered platforms such as Kalshi.
Pacold's order consolidates three separate lawsuits against the state: Coinbase v. Raoul et al., a case brought by the CFTC alongside the Coalition for Fair Markets and OG.com, and Kalshi v. Raoul et al. The coalition's membership includes Kalshi, Polymarket and Crypto.com.
The injunction blocks Illinois from imposing licensing requirements, fees and taxes, and from pursuing criminal or civil enforcement, subpoenas or other investigative measures against the plaintiffs while the litigation continues.
Illinois lawmakers approved a 2026 budget package that redefined sports exchange wagers as a form of state-regulated sports betting under an amended Sports Wagering Act. Exchanges registered with the CFTC would have to pay several million dollars for licences under the law, which also imposed a tax beginning at 1.75% on each wager placed through event contracts.
Kalshi sued the state in June, arguing the law violated the Supremacy Clause in its attempt to regulate event contracts. The CFTC had already sued Illinois in April over what it called "aggressive and overzealous" enforcement actions, including cease-and-desist orders, and later amended that complaint to challenge the new law directly. Coinbase, which filed its own suit against Illinois in December 2025, made a similar amendment.
Kentucky faced comparable litigation after the CFTC and prediction market operators sued the state in June over its own attempt to license, regulate and tax event contracts.
In her reasoning, Pacold concluded that sports event contracts function as swaps because their underlying outcomes carry "a potential financial, economic, or commercial consequence," though she repeatedly referred to the contracts as "bets" in her written judgment. She found that several Illinois statutes were likely preempted by the Commodity Exchange Act, that the plaintiffs were likely to succeed on the merits, and that they would be "irreparably harmed" absent a preliminary injunction.
SBC Americas said it contacted the Illinois Attorney General's office for comment, but spokespeople declined to discuss the matter while litigation is ongoing.
Wisconsin appeals already pending
The Illinois appeal lands at the Seventh Circuit alongside two existing disputes from Wisconsin. The CFTC appealed to the same court after a Wisconsin judge denied it a preliminary injunction in July, ruling that the commission had not demonstrated that sports event contracts qualify as swaps under the Commodity Exchange Act, and that federal authorisation to offer such contracts does not override state gambling law.
Separately, the Seventh Circuit last week agreed to let Kalshi appeal a May ruling permitting the Ho-Chunk Nation to pursue its Indian Gaming Regulatory Act claims against Kalshi. The combined docket now gives the appeals court multiple routes to rule on how far federal commodities regulation can pre-empt state gambling law.