A federal judge in Chicago has blocked Illinois from applying key parts of its new prediction market rules to Kalshi and Coinbase. The ruling hands the event contract industry a rare district court win in a week when state regulators elsewhere stepped up enforcement.

Judge Martha M. Pacold of the US District Court for the Northern District of Illinois granted partial preliminary injunctions on Friday 2 October in consolidated cases brought by Kalshi, Coinbase and the US government, acting with the Commodity Futures Trading Commission (CFTC), against the state. The decision was reported on Monday by the Chicago Sun-Times and has since been picked up across the trade press.

What Illinois tried to do

The rules were written into Illinois’ fiscal 2027 budget package, approved in July, and were due to bring exchange-traded sports contracts under the state’s sports wagering framework. They included licensing requirements, a minimum age of 21, location and sport-type restrictions, criminal penalties and a new transaction fee of 1.75% on an exchange’s first $5m of sports wagers in a fiscal year, rising to 3.5% above that.

The Illinois Gaming Board had already sent cease-and-desist letters in April to several platforms, including Kalshi, Polymarket, Crypto.com and Robinhood. Only Kalshi and Coinbase are plaintiffs in this case.

“A swap is a swap”

Pacold found that many of the sports event contracts at issue are likely to be swaps under the Commodity Exchange Act, which would put them within the CFTC’s exclusive jurisdiction when they are traded on a designated contract market and so pre-empt the state rules. According to reports of the ruling, she wrote that the instruments “just happen to be swaps that people find entertaining and fun”.

The judge also found that the Illinois age, location and trading rules would in effect force Kalshi to build a separate market for Illinois residents under threat of criminal penalties. That was enough to establish irreparable harm.

The relief is limited. Reports indicate that it covers contracts with concrete financial consequences, such as which team wins a championship, and not novelty markets lacking them. Pacold did not decide whether the state can levy its transaction fee, observing that taking a cut of the platforms’ revenue might not conflict with federal law in the way regulating the whole market would. That question is subject to further briefing.

A split inside the Seventh Circuit

The ruling sits awkwardly with a decision in neighbouring Wisconsin, where a federal court refused the CFTC a preliminary injunction in July. That case is now before the Seventh Circuit Court of Appeals, which would also hear any Illinois appeal. Illinois has not said publicly whether it will appeal.

At appellate level the picture is just as divided. The Sixth Circuit ruled on 25 September, in consolidated Ohio and Tennessee cases, that Kalshi’s sports contracts are not swaps and are subject to state gaming law. The Third Circuit had earlier sided with Kalshi against New Jersey. New Jersey has since petitioned the Supreme Court, with Kalshi’s response due in November.

Enforcement elsewhere has not slowed. Days after the Sixth Circuit ruling, the Ohio Casino Control Commission ordered ten prediction market operators, including Polymarket, Robinhood and Coinbase, to stop offering sports contracts in the state by 16 October.

For operators the practical result is a patchwork. Sports event contracts can be offered under federal protection in some states and face cease-and-desist orders in others, and that is likely to last until the Supreme Court decides whether to take up the swaps question.

The Chicago Sun-Times has further detail on the Illinois case.

The Ohio Casino Control Commission (OCCC) has sent cease-and-desist notices to 10 prediction market operators, ordering them to stop offering sports event contracts to customers in the state by 16 October.

The letters, dated 2 October, went to Polymarket, Robinhood, Coinbase, Underdog, Novig, ProphetX, Gemini Titan, Webull, Plus500 and Moomoo. Each notice states that sports event contracts amount to sports wagering under Ohio law and can only be offered with a state licence. The recipients have 14 days to confirm they have complied.

Kalshi was not on the list. The company is already in litigation with the state and was fined $5m by Ohio in April, according to reporting by Covers.

Regulator cites young and vulnerable customers

The OCCC framed the move as a consumer protection measure rather than a jurisdictional land grab. “Because these wagers lack the protections Ohio law requires, particularly for young and vulnerable people, the Commission must take action to fulfill its statutory responsibilities,” said Andromeda Morrison, the commission’s interim executive director.

Operators that ignore the notices face administrative, civil and potentially criminal action. The letters warn that the commission could seek penalties equal to the money or value of property obtained through offering the contracts in Ohio. Offering unlicensed sports betting is a felony under state law.

The commission had previously written to Robinhood in March 2025, and has also warned its licensed sportsbooks that vendor relationships with prediction market platforms could put their Ohio licences at risk.

Sixth Circuit ruling opened the door

The enforcement wave follows the 25 September decision by the US Court of Appeals for the Sixth Circuit, which held that the Commodity Exchange Act does not pre-empt Ohio’s sports betting laws. Writing for the court, Judge Julia Smith Gibbons said state betting laws “do not directly regulate” designated contract markets and “have only incidental effects on them”. The ruling binds federal courts in Kentucky, Michigan and Tennessee as well as Ohio.

Ohio waited little more than a week to act on it. Missouri’s attorney general has issued similar orders to six platforms, and the trade press now counts a growing list of states using cease-and-desist letters rather than waiting for the federal picture to settle.

Illinois pulls the other way

The courts remain split. On 2 October, US District Judge Martha Pacold in Illinois granted Kalshi and Coinbase a partial preliminary injunction, finding that Kalshi’s core sports contracts are likely swaps under federal law and blocking Illinois from applying its sports wagering licensing rules and related criminal provisions to them. A challenge to Illinois’ wagering fees, including new prediction-market transaction fees, was held over for further briefing.

The decision was the first federal win for Kalshi after a run of 16 straight losses, according to reporting by Prediction News, and it sits uneasily alongside the Sixth Circuit’s reasoning and a Wisconsin ruling now on appeal to the Seventh Circuit. State regulators’ associations IAGR and NAGRA have already asked the US Supreme Court to settle the question.

The pressure is not confined to the US. The Czech government has added Kalshi to its list of unauthorised gambling operators, and Polymarket is appealing a EUR420,000 penalty imposed by the Dutch regulator.

What happens next

The 16 October deadline lands in the middle of the NFL and college football season, the most lucrative stretch of the year for sports event contracts. Operators that pull out of Ohio will lose access to one of the largest regulated betting states in the Midwest, while any that stay put invite a test case in a circuit where the appellate law now favours the state.

For licensed sportsbooks such as DraftKings and FanDuel, which have both launched prediction products of their own, the Ohio action is a reminder that the regulator views the two businesses as one and the same when the underlying event is a game.

Missouri Attorney General Catherine Hanaway has ordered six prediction market and trading platforms to stop offering sports event contracts in the state, arguing that they are unlicensed sports betting.

According to the Attorney General’s office, cease-and-desist letters were sent on 18 September to Polymarket, Kalshi, Crypto.com, Novig, Underdog and Robinhood. Local reports said the platforms were given 30 days to comply, although the press release itself named no specific deadline, and enforcement action was threatened for non-compliance.

The legal argument

The office says Missouri’s Amendment 2, approved by voters in 2024, created a licensed sports wagering market, which launched on 1 December 2025 with a 10% tax on gross receipts and a minimum age of 21. It argues that sports event contracts are not “swaps” under the federal Commodity Exchange Act and that federal courts have found online wagering platforms subject to state law.

“Companies cannot repackage sports bets as ‘event contracts’ to avoid Missouri law,” Hanaway said. Five of the six companies were also cited over age verification: Polymarket, Kalshi, Crypto.com, Underdog and Robinhood.

The platforms respond

Robinhood has said its event contracts are federally regulated by the CFTC and offered through a CFTC-registered entity. Polymarket said prediction markets sit under a federal framework rather than “a patchwork of state rules”. Kalshi has also publicly responded to the order, according to Spectrum News.

Part of a wider fight

Missouri’s move follows the Sixth Circuit ruling that let Ohio and Tennessee regulate Kalshi’s sports contracts, and comes as the CFTC sends its own draft event contract rules to the White House for review. New Jersey has asked the US Supreme Court to hear its Kalshi case, backed by an amicus brief from gaming-state legislators.

For Missouri’s licensed operators, the stakes are practical. They pay tax and licence fees that the prediction platforms say they do not owe, and they have pressed states to act. If the 30-day window passes without compliance, Missouri would have to choose between litigation and tolerating the products, and either choice will be watched by other attorneys general weighing the same step.

The outcome will turn on whether federal courts treat these contracts as derivatives or as bets. Until the Supreme Court or the CFTC settles that, states are likely to keep testing the question one letter at a time.