Judge Partly Blocks Illinois Prediction-Market Law for Kalshi

Judge Pacold’s ruling covers challenges brought by Kalshi, Coinbase and the CFTC, whose own suit against Illinois was filed in April (N.D. Ill. No. 1:26-cv-03659, according to the Vultax docket tracker). Trade press described the result as partial injunctions. Our summary relies on trade-press reporting; we have not yet reviewed the order itself, and we will update this article when we have.

What Illinois passed

Illinois chose legislation over litigation. Its FY2027 budget bill, SB 3019, signed on June 16, 2026 and effective July 1, classified trades on prediction-market exchanges as “exchange wagers” under its sports-wagering law. According to legal and press summaries (we have not reviewed the enacted text), that meant:

• A $15 million four-year license, renewable for $1 million, to offer such contracts in Illinois.
• A tax of 1.75% on the first 5 million contracts and 3.5% after that.
• Criminal exposure for offering sports wagers without a license.

Kalshi sued to block the law. The CFTC and the Justice Department had already sued Illinois on April 2, 2026, in a case covering Arizona and Connecticut as well. Coinbase, whose prediction-market product runs on Kalshi’s exchange, is also a party to the ruling.

What the injunction blocks, and what it does not

According to the reporting, the order bars Illinois from enforcing two parts of the law against contracts listed on Kalshi’s exchange:

1. The licensing requirement.
2. The criminal provisions.

The challenge to the fees and taxes remains pending. So the immediate threat of being shut out or prosecuted is on hold for Kalshi-listed contracts, but the question of whether Illinois can tax them is open. The order is preliminary. It reflects the judge’s view that the challengers are likely to succeed, not a final judgment.

Why this ruling stands out

The platforms’ recent appellate record has been poor: losses in the Ninth Circuit in August and the Sixth Circuit in September (our coverage). District courts have been more mixed. Federal judges in Arizona (May 2026) and Minnesota (July 2026) also granted injunctions sought by the CFTC or the platforms, according to press reports.

It also sits awkwardly next to Wisconsin. Illinois and Wisconsin are both in the Seventh Circuit. On July 28, 2026, a federal judge in Wisconsin denied the CFTC’s request to block Wisconsin’s gambling enforcement, finding the agency was not likely to show that sports contracts are swaps. That ruling is on appeal. Two trial courts in the same circuit have now reached different outcomes on closely related questions, which makes the Seventh Circuit’s eventual decision important for both states.

How the Supreme Court handles the three pending petitions could matter more than either trial ruling (our explainer).

What it means for users in Illinois

If you trade on Kalshi or on Coinbase’s prediction-market product in Illinois, the order reduces the near-term risk that sports contracts are pulled because the operator lacks a state license. It does not settle the tax question. State taxes are becoming a real cost line for platforms: Kentucky’s 14.25% excise tax and North Carolina’s 6% tax on net trading-fee revenue both take effect on January 1, 2027. Whether platforms pass those costs on to traders is their decision, and fees are where it would show up; our fee guide explains how per-contract fees are calculated.

The order applies to Kalshi-listed contracts. Exchanges that are not parties to the case are not covered by it. Your app’s location check remains the authority on what you can trade. For status in every state, see our legal tracker, and for how Kalshi works, our Kalshi review.