Federal judge blocks Illinois regulation of prediction markets

A federal judge in Chicago has blocked Illinois from regulating prediction markets, ruling that these platforms fall under the exclusive jurisdiction of federal regulators rather than state gambling laws. In her decision, Judge Martha Pacold classified the event contracts offered by platforms such as Kalshi as “swaps” under the Commodity Exchange Act.

The ruling supports a lawsuit filed by Kalshi and Coinbase, which argued that state-level restrictions on prediction markets were preempted by federal law. While the platforms function similarly to sports betting apps, the court noted they are not considered gambling because users trade against one another rather than against a “house.”

Although the injunction prevents Illinois from imposing certain regulatory restrictions, Judge Pacold indicated she may still uphold the state’s ability to tax transaction fees from these companies. The decision provides significant legal clarity for the growing prediction market industry, even as a fragmented regulatory landscape persists across different U.S. states.