Kalshi Wins Partial Federal Court Ruling Against Illinois

Kalshi has secured its first federal court victory in months, partly blocking Illinois from enforcing sports wagering license rules and a related criminal provision against the prediction market platform and Coinbase. U.S. District Judge Martha Pacold ruled that Kalshi’s title-game contracts, such as bets on the Chicago Cubs winning the 2026 World Series, are likely swaps under the Commodity Exchange Act, overriding state regulations. The decision prevents Illinois from requiring Kalshi to obtain a state license, which would have restricted trading to Illinois residents aged 21 and older and limited the sports events covered.

The ruling marks a departure from other courts, including the Ninth Circuit, which previously dismissed Kalshi’s contracts as mere bets. Judge Pacold countered that “a swap is a swap,” emphasizing that federal law supersedes state regulations in this context. The decision aligns with earlier rulings in New Jersey but conflicts with recent decisions in Wisconsin, Nevada, and Massachusetts, where courts sided with state regulations.

The judge declined to rule on Illinois’ proposed prediction market fees, which include a 1.75% transaction fee on the first five million “exchange wagers” and a higher rate beyond that, plus additional fees. Pacold noted that while regulatory uniformity does not require cost uniformity, fees that effectively regulate the market could still be preempted. Further briefing on this matter has been ordered.

Kalshi’s partial win follows a string of legal setbacks, including a loss in Minnesota this summer. The company, backed by Coinbase, continues to face legal challenges across multiple states, with appeals pending in several federal circuits. The Supreme Court has been asked to resolve the conflicting rulings, with Kalshi’s response to New Jersey’s petition due in November.