Illinois appeals federal injunction blocking state oversight of CFTC-regulated prediction markets

Illinois has appealed to the Seventh Circuit after a federal judge barred state regulators from acting against prediction platforms regulated by the Commodity Futures Trading Commission. The ruling came from Judge Martha M. Pacold, who entered a formal preliminary injunction in October.

The injunction confirms her earlier decision granting preliminary relief in part. It stops Illinois from imposing fees and taxes, licensing requirements, or civil and criminal enforcement on platforms offering sports-related contracts. It remains unclear when the appeals court will take up the state's petition, so the platforms can keep operating in Illinois for now.

The dispute follows a legislative proposal from July to tax prediction market transactions in the same way as sportsbooks. Under the plan, trades would be taxed at 1.75% for the first five million and 3.5% beyond that threshold. Kalshi and the CFTC responded by filing a lawsuit against the state.

Illinois officials have been cautious about the sector for some time. In April, Governor JB Pritzker issued an executive order barring state employees and officials from using confidential information to take part in event-based betting platforms. Officials said the sector lacked adequate safeguards, which they argued justified state action.

The case is one of several similar clashes across the country. Kalshi has filed separate lawsuits against Missouri and Louisiana, arguing that only the CFTC has authority to regulate its activities. States counter that the sports-related contracts amount to sports betting under another label and fall under state law.

The growing number of conflicting rulings has led many to expect that the Supreme Court may have to step in. Attorneys general from 39 states and the District of Columbia have asked the court to take up New Jersey's case against Kalshi. Stakeholders say that until there is a definitive ruling on who regulates prediction markets, the uncertainty is likely to continue.