Prediction market platform Kalshi secured a partial preliminary injunction against Illinois in a federal case that centers on whether the state can apply its sports betting licensing regime and related criminal provisions to the exchange. On Oct. 2, Judge Martha M. Pacold of the U.S. District Court for the Northern District of Illinois said those state rules may be preempted by federal law and cannot, for now, be enforced against Kalshi. The ruling temporarily blocks Illinois from requiring the company to hold a state license that would have limited trading to users age 21 and older who are physically located in the state, while also narrowing which sporting events contracts could track. Pacold did not rule on the state’s newly created prediction market fees and instead directed the parties to submit additional briefing. In the same decision, the judge said contracts tied to championship winners may qualify as swaps under the Commodity Exchange Act and therefore should trade on a designated contract market under federal oversight. That view departs from an August decision by the Ninth Circuit, which found similar contracts were gambling rather than swaps. The ruling marks Kalshi’s first win in federal court since July, according to Bitcoin.com News.
Prediction market platform Kalshi has won a partial preliminary injunction in its case against Illinois.
On Oct. 2, Judge Martha M. Pacold of the U.S. District Court for the Northern District of Illinois ruled that the state’s sports betting licensing regime and related criminal provisions may be preempted by federal law and, for now, cannot be enforced against Kalshi.
State license requirement temporarily blocked
The order temporarily stops Illinois from requiring Kalshi to hold a state license. Under that framework, traders would have been required to be at least 21 years old and physically located within the state, and the contracts would have faced limits on which sporting events they could track.
The court did not decide the question of Illinois’ new prediction market fees. Instead, it asked the parties to file additional arguments on that issue.
Judge says championship winner contracts may be swaps
Pacold said contracts tied to championship winners may fall within the Commodity Exchange Act’s definition of swaps, meaning they should trade on a designated contract market and remain subject to federal regulation.
That conclusion differs from an August ruling by the Ninth Circuit Court of Appeals, which found that similar contracts were gambling products rather than swaps.
Fee dispute remains unresolved
Under Illinois’ new budget law, exchanges face a 1.75% charge on the first 5 million related trades and 3.5% after that threshold. The law also adds a 15% fee on gross revenue and a per-trade charge of 25 cents or 50 cents.
The decision marks Kalshi’s first win in federal court since July, according to Bitcoin.com News.
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