Chicago judge finds Illinois gambling law likely pre-empted for Kalshi title-game contracts

A federal judge in Chicago has ruled that the Commodity Exchange Act (CEA) likely pre-empts parts of Illinois law as applied to sports-event contracts sold through CFTC-registered markets. She granted preliminary-injunction motions from Kalshi, Coinbase and the United States “in part”, and continued them in part.

Judge Martha Pacold of the Northern District of Illinois issued a joint memorandum opinion and order on 2 October in three cases:

• Coinbase Financial Markets v. Raoul
• the federal government’s suit against Illinois, joined by intervenors the Coalition for Fair Markets and the North American Derivatives Exchange (OG)
• KalshiEX v. Raoul

Title contracts are “likely swaps”

The judge confined her analysis to the example both sides argued over: a contract on who wins a title game, such as “will the Chicago Cubs win the 2026 World Series?”. She said she would tailor any relief to that.

On the central statutory question, she found that Kalshi’s title contracts are likely “swaps”. In her reading, they make payment depend on an event “associated with a potential financial, economic, or commercial consequence”. This is the same provision on which the Sixth Circuit, on 25 September, held that Kalshi had not met its burden. The conclusion sums up: “Many of the financial instruments at issue are likely swaps as defined by the Commodity Exchange Act—they just happen to be swaps that people find entertaining and fun.”

Which Illinois laws fall

The court did not hold that everything traded on a DCM is automatically shielded. If it were, the opinion says, the CFTC, or private parties self-certifying listings, could “manipulate the practical scope of federal preemption”. Instead, the court looked provision by provision.

Illinois’s sports-wagering licensing regime and its criminal backstop “likely” amount to impermissible control over trading in swaps. That regime includes:

• the under-21 ban
• in-state-only rules
• limits on which games and data sources may be used

The ruling applies Seventh Circuit precedent that state rules adding to CFTC requirements for trading on a designated market create a conflict. The state’s flat and percentage fees on wagers “pose further questions” that the opinion leaves open.

On the equities, the judge found irreparable harm to the plaintiffs. She also found “little to no weight” on the state’s side, since there is little interest in enforcing laws that are likely pre-empted. Illinois had argued that sports wagering is “particularly addictive and especially attractive to young people”. The court replied that “Congress assigned those considerations to the CFTC, not the courts.”

Why it matters

The ruling creates conflicting signals for venues operating nationally. Within a fortnight, a federal appeals court said sports contracts are probably not swaps, and a district court in another circuit said they probably are. Until the Supreme Court or Congress settles the point, state access will depend on the circuit.

For compliance teams at DCMs, FCMs and introducing brokers, the opinion is also a reminder that relief is product-specific. The court reasoned only about title-game contracts. Player-prop or record-based contracts may need their own analysis, and a percentage-of-handle state fee could survive even if licensing does not. Firms planning state-by-state availability should treat the Illinois ruling as narrow until the final injunction terms are known.

Sources

• Coinbase Financial Markets, Inc. v. Raoul; United States v. State of Illinois; KalshiEX LLC v. Raoul, Memorandum Opinion and Order, N.D. Ill. (Pacold, J.), filed 2 October 2026 — https://storage.courtlistener.com/recap/gov.uscourts.ilnd.498112/gov.uscourts.ilnd.498112.99.0.pdf