Illinois judge blocks key sports-wagering rules for Kalshi title-game contracts

A federal judge has temporarily barred Illinois from applying key sports-wagering licensing and criminal provisions to a narrow set of Kalshi-listed contracts, marking a preliminary win for Kalshi, Coinbase and federal regulators in their challenge to state gambling controls.

U.S. District Judge Martha M. Pacold on Oct. 2 granted in part preliminary-injunction motions filed by Kalshi, Coinbase, the United States and intervenor plaintiffs in three related cases. The relief applies to contracts whose outcome depends on the winner of a title game, such as a contract on whether the Chicago Cubs will win the 2026 World Series.

Pacold concluded that the Commodity Exchange Act was likely to preempt Illinois laws insofar as they dictate which sports contracts federally regulated exchanges can list and who can trade them. Kalshi’s platform is a federally regulated designated contract market, while Coinbase partnered with Kalshi to let Coinbase customers trade Kalshi-listed contracts using cryptocurrency held through Coinbase.

The judge found that the representative championship contracts were likely swaps under federal law because such outcomes can have concrete financial consequences for broadcasters, arena operators, concession businesses and sponsors. “Swaps are swaps whether they are used to gamble,” Pacold wrote.

The ruling did not hold that every contract listed by a federally registered exchange is a swap. Pacold said each contract must independently meet the statutory test, which covers transactions tied to an event with a potential financial, economic or commercial consequence. Coinbase acknowledged during argument that a contract on the color of the sports drink poured on a coach after a Chicago Bears win would not meet that standard.

Illinois had argued that sports contracts lacked the economic connection Congress intended when it expanded federal swaps oversight after the financial crisis. The state also said its gambling regulation was needed to protect consumers, particularly young people, from addictive products.

Pacold left unresolved a separate challenge to Illinois’s new wagering and transaction fees and ordered further briefing. The fiscal 2027 budget imposes a 1.75% charge on an exchange’s first 5 million sports-related exchange wagers in a fiscal year and 3.5% on later wagers, on top of a 15% levy on gross sports-wagering receipts and an existing per-wager charge of 25 cents or 50 cents.

The judge wrote that federal regulatory uniformity did not necessarily mean costs must be uniform. But she said a sufficiently large state fee could effectively restrict the operation of the market.

The dispute followed an April 1, 2025, cease-and-desist letter in which the Illinois Gaming Board accused Kalshi of offering unlicensed sports wagering and warned of civil or criminal penalties. The United States and the Commodity Futures Trading Commission later sued Illinois, Arizona and Connecticut on April 2, arguing that state restrictions interfered with the national derivatives-market system created by Congress.

The Illinois decision differs from a July 29 ruling by U.S. District Judge William C. Griesbach in Wisconsin, who denied the CFTC’s request to stop that state from enforcing its gambling laws against sports-event-contract providers. Griesbach found at that stage that the agency had not shown the contracts likely were swaps, that federal law displaced Wisconsin’s restrictions, or that an injunction was otherwise warranted. The Wisconsin case was administratively closed Sept. 9 while appeals proceeded in the Seventh Circuit.