TLDR
- Illinois has appealed a federal ruling that blocks it from regulating prediction market platforms.
- Judge Martha M. Pacold’s injunction bars state taxes, licensing rules, and enforcement actions.
- The ruling freezes a July proposal to tax prediction market trades at 1.75% and 3.5%.
- Kalshi is also suing Missouri and Louisiana, saying only the CFTC can regulate it.
- Attorneys general from 39 states and DC have asked the Supreme Court to hear New Jersey’s case against Kalshi.
Illinois has filed an appeal with the Seventh Circuit Court of Appeals after a federal judge blocked the state from regulating prediction market platforms. The ruling stops the state from taxing, licensing, or taking enforcement action against platforms overseen by the Commodity Futures Trading Commission (CFTC).
The order came from U.S. District Judge Martha M. Pacold. It leaves platforms such as Kalshi free to keep offering sports-related contracts in Illinois while the appeal moves forward.
What the Injunction Blocks
In October, Judge Pacold entered a formal preliminary injunction against Illinois. The order builds on her earlier judgment, which granted preliminary relief in part.
The injunction bars Illinois regulators from taking any steps to regulate CFTC-regulated prediction platforms. This covers fees and taxes, licensing requirements, and civil or criminal enforcement actions.
The ruling largely shuts down the state’s efforts to gain some control over the sector. Illinois had been working on several fronts to oversee prediction markets this year.
In July, Illinois lawmakers proposed a bill to tax prediction market transactions in a similar way to sportsbooks. The plan called for a 1.75% tax on the first five million trades.
Trades beyond that five million threshold would have been taxed at 3.5%. Kalshi and the CFTC quickly challenged the proposal by filing a lawsuit against the state.
State officials had raised concerns before the tax plan. In April, Governor JB Pritzker signed an executive order aimed at limiting possible abuse tied to prediction markets.
The order barred state employees and officials from using confidential information to trade on event-based betting platforms. Officials said the sector lacked enough safeguards and needed state oversight.
Appeal Joins a Wider State Fight
Illinois has now asked the Seventh Circuit to review Judge Pacold’s ruling. It is not clear when the appeals court will take up the case.
Until the court acts, prediction platforms can keep operating in Illinois. The injunction remains in place during the appeal.
Illinois is one of a growing number of states in legal fights with prediction markets. Kalshi recently filed separate lawsuits against Missouri and Louisiana.
In those cases, Kalshi argues that any state attempt to regulate its business is illegal. The company says only the CFTC has authority over its platform.
States take the opposite view. They argue that Kalshi’s sports-related contracts are sports betting under a different name and should follow state gambling laws.
Conflicting rulings across the country have increased pressure on the U.S. Supreme Court to step in. Many observers believe the dispute could end up before the high court.
Attorneys general from 39 states and the District of Columbia have asked the Supreme Court to hear New Jersey’s case against Kalshi. Stakeholders say the confusion over who regulates prediction markets will likely continue without a final ruling from the Court.
