A federal judge in Chicago blocked Illinois from regulating prediction markets as gambling, ruling they fall under the sole jurisdiction of federal regulators. Judge Martha Pacold issued the injunction in Chicago’s federal district court.

Pacold wrote that many of the financial instruments at issue are likely swaps as defined by the Commodity Exchange Act. "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," she wrote.

"Under the Act and precedent interpreting it, some Illinois law is likely preempted. Plaintiffs are therefore likely to succeed — at least in part," Pacold said. "The other laws Illinois seeks to enforce cause a conflict because they regulate what can be sold, as well as where it can be sold and to whom." She signaled she is open to upholding the state tax on transaction fees from prediction markets, noting that taking a cut of profits might not pose the same conflict as regulating an entire market.

The NFL filed an amicus brief with the Supreme Court urging it to affirm that states have the authority to regulate sports prediction market contracts as gambling. The league's brief contends that sports prediction contracts constitute gambling rather than financial swaps under exclusive federal oversight by the CFTC. "It is well established, however, that regulating gambling is among states' sovereign police powers," the NFL stated. "What constitutional power allows Congress to override states' traditional police powers to regulate intrastate gambling?"

"Neither the CFTC nor the prediction market companies themselves — despite our persistent urging — have banned categories of bets susceptible to manipulation or set a 21 age limit," the league said. The NFL identified wagers on field goals, fumbles, injuries, and officiating calls as contract types susceptible to exploitation by individuals with privileged access to team information. It has urged prediction platforms to eliminate such contract types and align their minimum user age with the 21-year threshold required by most state sports-betting frameworks.

Kalshi allows users to be as young as 18. Sports betting constitutes more than 90% of site activity and 89% of revenue for Kalshi in 2025. Football accounted for $1.8 billion in trading on the first Sunday of the NFL season, representing more than half of total platform volume.

The NFL stated it is not opposed to prediction markets in principle but believes state regulators are better positioned than the CFTC to oversee them due to agency resource constraints. “We don't feel like we have to be the first in this. We feel like we're going to be right, and the best thing to do is be patient,” the league said. The league has declined to enter into commercial partnerships with prediction platforms and kept them off its airwaves.

Illinois Gaming Board administrator Marcus Fruchter issued cease-and-desist letters in April to Kalshi, Polymarket, Crypto.com, and Robinhood. The letters accused the companies of engaging in illegal gambling in violation of Illinois law. Governor JB Pritzker signed an executive order earlier this year barring state employees from using insider information to bet on prediction markets.

Illinois lawmakers authorized the prediction market regulatory framework to help pass a $56 billion state budget, ordering companies to block traders younger than 21 and restricting offerings on sports. State lawmakers did not count on revenue from the prediction market tax in their budget projections.

Judge Pacold withheld a decision on whether Illinois can tax profits from prediction markets pending further arguments. Kalshi founder Luana Lopes Lara called the ruling "beautiful" in a social media post. Kalshi has disputed the characterization of its contracts as gambling in its own court filings. Prediction market platforms allow users to trade against each other rather than playing against the house.

The Ninth Circuit ruled in August that states can enforce gambling laws against sports prediction market platforms, finding that Kalshi's sports event contracts constitute sports betting rather than federally regulated swaps. The Third Circuit ruled in favor of prediction market platforms, blocking New Jersey's attempt to apply state gaming laws against them. The conflicting rulings between the Ninth and Third Circuits create a circuit split regarding the regulation of prediction markets. The legal case involves New Jersey regulators and the prediction market platform Kalshi.

Blanche Lincoln is currently a lobbyist for the prediction market Kalshi. She has urged the CFTC to allow sports gambling on prediction markets. The firm founded by Lincoln has received $480,000 from Kalshi since 2024.

The NHL has formed partnerships with Kalshi and Polymarket. MLB, Major League Soccer, and UFC have each struck deals with Polymarket.

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In July 2010, US Senator Lincoln warned during Senate proceedings that prediction markets could evade gambling laws by offering event contracts on sports games. Lincoln stated during Senate proceedings that the CFTC needs the authority to prohibit event contracts that exist primarily to enable gambling. Lincoln was chair of the Senate Agriculture Committee and a primary author of Title VII of the Dodd–Frank Act. "These types of contracts would not serve any real commercial purpose. Rather, they would be used solely for gambling," Lincoln said.