Illinois appeals Pacold injunction blocking its prediction-market licensing and tax regime

A federal judge has barred Illinois from licensing, taxing or prosecuting sports event contracts listed on CFTC-regulated exchanges. The state’s appeal sends the fight to the Seventh Circuit, which already has prediction-market cases from Wisconsin.

Illinois has lost, for now, its power to police sports event contracts traded on federally regulated exchanges. Judge Martha Pacold’s order in the Northern District of Illinois turns her early-October ruling into a formal injunction. It covers contracts listed on CFTC-regulated platforms such as Kalshi and Coinbase.

The order reaches three state tools. They are the Sports Wagering Act, the criminal gambling statute and an Illinois Gaming Board internet-wagering rule. The budget’s prediction-market fees fall with the licensing rules, because they apply only to providers holding a state license. Her first ruling had left the tax question open and called for more argument on the fees.

A large regulated market loses its grip on exchanges

The stakes are significant. Fiscal 2026 was the first year of the state’s per-wager tax on licensed sports wagering.

The Gaming Board had already tried to act. It sent cease-and-desist letters to KalshiEX, Crypto.com and Robinhood on April 1, 2025. Polymarket received one on Jan. 27, 2026. Those letters cited the Sports Wagering Act (230 ILCS 45) and the criminal code (720 ILCS 5/28-1(a)).

Lawmakers then took a different route. Gov. JB Pritzker signed the budget containing the new framework on June 16. Under the package, which includes SB 3019, prediction markets became exchange wagers under the Sports Wagering Act and needed a Gaming Board license. Each transaction carried a tax that would climb once a licensee passed five million exchange wagers. In September, Republican Rep. Travis Weaver filed House Bill 5811 to repeal the exchange-wager tax. His bill would leave the licensing rules in place.

Licensed online and mobile sportsbooks face their own costs. A first license for that category costs $15 million and runs four years, with each four-year renewal priced at $1 million.

Seventh Circuit now holds both Illinois and Wisconsin disputes

Courts are divided on whether state gambling laws reach CFTC-regulated sports contracts. Pacold’s order is a rare win for Kalshi and the federal regulator. Before her early-October decision, Kalshi had lost 16 federal court rulings in a row. In that opinion, Pacold found the state’s other laws in conflict with federal law because they control “what can be sold, as well as where it can be sold and to whom.”

The CFTC sued Arizona, Connecticut and Illinois on April 2, 2026, over their actions against federally registered designated contract markets. Chairman Michael Selig said the agency would defend market participants against “overzealous state regulators.”

For operators, the injunction offers room to keep listing sports contracts in Illinois for now. For the state, it removes a revenue stream and an enforcement path at once. Anticipating a legal challenge, legislators had kept the tax’s revenue out of their budget projections. The outcome now depends on a single appeals court.

On July 29, Judge William Griesbach ruled against the CFTC in Wisconsin, and the agency took that case to the Chicago-based court. Illinois has asked the Seventh Circuit to reverse and vacate Pacold’s order.

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