A federal court in Illinois has handed Kalshi and Coinbase a partial preliminary injunction in their dispute with state regulators over sports event contracts, while leaving the state's transaction fee regime unresolved.

On October 2, 2026, US District Judge Martha M. Pacold granted the injunction in favor of the two companies and the Commodity Futures Trading Commission, which joined the suit as a co-plaintiff against Illinois officials. The order is preliminary, not a final judgment, but it signals the court's view that the plaintiffs are likely to succeed on the core question.

That question is preemption. Judge Pacold concluded that certain Illinois licensing requirements, including provisions under 230 ILCS 45, likely conflict with the federal Commodity Exchange Act, the statute that governs swaps and other derivatives and places them under CFTC jurisdiction. The plaintiffs' argument rests on classification: if Kalshi's sports event contracts count as swaps under the CEA, they fall under exclusive federal oversight rather than state gambling law. The court endorsed that reasoning at this stage.

The win comes with limits. The judge declined to settle whether Illinois may apply its transaction fee rules to these contracts and asked the parties for further briefing on the issue. She also instructed them to return with proposed terms for the injunction, which will determine how constrained the state's enforcement authority is in practice. A narrowly drafted order could leave Illinois room to maneuver; a broad one would more fully clear the way for Kalshi and Coinbase customers in the state.

Kalshi is no newcomer to federal oversight. The company has operated as a CFTC-registered designated contract market since November 2020. It began offering trading on sports event contracts in January 2025, products that let users take positions on game outcomes — instruments that look like sports betting to state regulators and like derivatives to Kalshi.

Coinbase entered the market in December 2025, when it announced a partnership with Kalshi to give its users access to those contracts. The exchange's involvement widens the commercial stakes, since a favorable legal posture in a given state determines whether its retail user base can trade the products there at all.

The CFTC's role as co-plaintiff carries weight beyond this case. A federal regulator arguing alongside the companies signals that the agency treats these contracts as squarely within its jurisdiction, reinforcing the argument that state gambling statutes cannot reach products the CEA already covers.

Illinois is one front in a wider conflict. Similar challenges have played out across multiple states, and courts have issued conflicting opinions on whether sports-related contracts belong with federal derivatives regulators or state gambling authorities. The split increases the pressure on appellate courts, and potentially Congress, to draw a clearer line.

The unresolved fee question deserves close attention. Transaction fees directly affect platform economics, and a state that loses on licensing but retains some fee authority could still shape whether operating there is profitable. For Kalshi and Coinbase, the difference between a state that cannot regulate the product at all and one that can tax each trade is the difference between a clean market and a burdened one.

The next concrete step is procedural but consequential. The parties must now submit proposed injunction terms and additional briefing on the fee issue, filings that will define the practical scope of the court's order. How Judge Pacold draws those lines, and how other courts read them, will shape the market structure for prediction markets and crypto platforms offering event contracts across the United States.