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Exchanges, federal government asks court to block Illinois’ enforcement of its prediction market law

Legal Writer

Publish Date: Jul 08, 2026

Fact checked by: Matt Moreno

Key Points

New motion asks for preliminary injunction against Illinois officials enforcing a statute governing trading of sports event contracts
Illinois law requires exchanges to obtain licensure from the state and pay tax on revenue from sports event contract trading
Refusal by the court could lead to exchanges limiting operations in Illinois

The United States Department of Justice and the U.S. Commodity Futures Trading Commission in coordination with a trade group for prediction market exchange operators have asked the U.S. District Court for the Northern District of Illinois for injunctive relief against several Illinois officials in regard to enforcement actions against prediction market trading. Although the litigation predates the enactment of a statute affecting sports event contract trading on the exchanges, this motion for a preliminary injunction focuses on that law.

The statute essentially treats exchanges that offer sports event contracts like Illinois’ licensed sportsbooks, with the exception of imposing a higher tax on their revenues than traditional sportsbooks pay. Should the motion for injunctive relief fail, exchanges might have to take action similar to that which they have already taken regarding sports event contract offerings in Michigan.

Motion asks court to block Illinois’ implementation of new law

The Commodity Futures Trading Commission (CFTC) and Department of Justice (DOJ) filed their brief with the district court on Tuesday. Joining them as potential intervenors is the Coalition for Fair Markets, a trade group consisting of multiple exchange websites like OG Predicts and Polymarket.

The filing is a continuation of a lawsuit that the CFTC and DOJ brought against multiple Illinois officials in early April, shortly after the Illinois Gaming Board sent letters to Kalshi and other exchanges demanding that they stop offering sports event contract trading to Illinoisans. The motion asks the court to enjoin those officials from taking any enforcement actions based on state laws against the exchanges while the lawsuit plays out.

Most of the argument for that action from the court involves a law that Illinois has passed since the lawsuit was first levied. While that statute only concerns sports event contract trading, it has several tenets that the plaintiffs object to.

Illinois law in the crosshairs of the motion for injunctive relief

Illinois included the text of a bill targeting sports event contract trading in its latest budget. The statute features several requirements for exchanges offering such trading in the state.

Exchanges must obtain licenses from the Illinois Gaming Board to offer sports event contracts in Illinois. Licenses initially cost $1 million and the fee for annual renewals is the same.

Revenue from such trading is subject to a 50% tax, which is higher than the rate that traditional sportsbooks pay in Illinois. The law considers revenue from “qualifying prediction market contracts placed by or with Illinois residents” to be taxable, meaning that could apply to Illinois’ residents activity even if they are not in the state when they perform transactions.

The plaintiffs’ motion argues that the statute violates the Dormant Commerce Clause of the U.S. Constitution, as it represents Illinois’ attempt to usurp federal law governing the activity. Regardless of how the court rules on this motion, an appeal to the US Seventh Circuit Court of Appeals is likely.

If that court upholds the lower court’s decision to deny the requested relief, more prediction exchange operators could mimic DraftKings’ and FanDuel’s approach to Illinois.

DraftKings, FanDuel have laid out potential path forward

Currently, DraftKings Predictions and FanDuel Predicts operate in Illinois, but they do not offer sports event contracts there to avoid competing with their online sportsbooks in the state. Fanatics has not launched its Fanatics Markets website in Illinois out of the same concern.

If Illinois is successful in this litigation, other websites like Kalshi and Polymarket may need to make the same adjustments, even if only on a temporary basis. This situation is already playing out in Michigan.

There, courts have refused similar requests for injunctive relief against enforcement actions taken by the Michigan Gaming Control Board. As a result, multiple exchanges have stopped offering sports event contracts to people in Michigan while litigation is in process.

There are likely months of deliberations ahead for this lawsuit in Illinois, with several possibilities remaining intact for the future of sports event contract trading there. The CFTC’s request for a preliminary injunction represents an important step in the process.

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