Illinois appeals injunction shielding some Kalshi and Coinbase sports contracts

Illinois has appealed a federal preliminary injunction that prevents the state from applying specified sports-wagering and gambling rules to certain federally regulated event contracts offered through Kalshi and Coinbase. Attorney General Kwame Raoul, Illinois Gaming Board members and its administrator filed the notice of appeal to the U.S. Court of Appeals for the Seventh Circuit on Oct. 30, the day Judge Martha M. Pacold signed the order.

The injunction covers swaps, including sports event contracts, listed on or available through Commodity Futures Trading Commission-regulated designated contract markets and futures commission merchants. It bars Illinois from imposing licensing requirements, associated fees and taxes, and related criminal provisions. It also prohibits civil or criminal enforcement actions, subpoenas and other compulsory investigative measures involving the covered contracts.

As we reported Oct. 2, Pacold had found the plaintiffs likely to succeed in arguing that federal commodities law pre-empts several Illinois rules when applied to contracts that qualify as swaps. The court resolved the related cases brought by Coinbase, Kalshi and the United States together because they raised similar positions against common state defendants.

Pacold’s earlier opinion held that title-type contracts traded on Kalshi were likely swaps under the Commodity Exchange Act. The opinion used a contract asking whether the Chicago Cubs would win the 2026 World Series as its representative example. Kalshi is a CFTC-regulated designated contract market, while Coinbase users can buy and sell Kalshi-listed contracts through their Coinbase wallets under the companies’ partnership.

The court concluded that Illinois’s sports-wagering licensing rules and a related criminal provision likely intruded directly on the federally regulated market by governing how the contracts are structured, what events they may reference and who may trade them. The Commodity Exchange Act grants the CFTC exclusive jurisdiction over certain swaps and contracts traded on designated contract markets, while retaining some concurrent powers for states and other authorities.

The order also affects Illinois’s fiscal 2027 transaction charge on exchange wagers tied to sporting contests. The levy is 1.75% on the first 5 million wagers in a fiscal year and 3.5% on later wagers. The parties agreed that further briefing was unnecessary because the charge applies to licensees, and the licensing injunction therefore prevents its enforcement against CFTC-registered exchanges and intermediaries. They left open whether federal law would pre-empt a tax imposed independently of a licensing regime.

The appeal did not itself suspend the injunction. The dispute joins a wider split over sports event contracts: the Sixth and Ninth Circuits have found the contracts likely not to be swaps and/or state law not pre-empted, while the Third Circuit found both field and conflict pre-emption. Three Supreme Court petitions on the issue were pending.

On Oct. 19, the CFTC proposed expressly including sports, political, cultural and weather event contracts within the definition of swaps, while issuing an interim final rule excluding casino-style gambling products such as sportsbook and casino-game wagers. The Illinois parties must file a joint status report proposing next steps by Nov. 12.