Illinois court preliminarily rules Kalshi sports event contract subject to federal preemption

PANews reported on October 3 that according to an article published by lawyer Ariel Givner, Judge Martha Pacold of the U.S. District Court for the Northern District of Illinois partially approved the preliminary injunction application of Coinbase, Kalshi, the U.S. government and the CFTC, temporarily preventing the state from implementing sports betting licensing requirements and related criminal penalties on the Kalshi sports event contract involved.

The judge held that Kalshi’s sports event contracts were likely to be “swaps” under the Commodity Exchange Act (CEA), and therefore Illinois’ sports betting licensing requirements and related criminal penalties were likely to be preempted by federal law. “Many of the relevant financial instruments are likely to be swaps within the meaning of the Commodity Exchange Act: they simply happen to be swaps that people find interesting and fun,” the judge noted in the opinion. Recreational status does not alter their federal regulatory status. This ruling is not a final judgment, and disputes such as fixed fees and proportional fees still need to be further reviewed.

Earlier news, the U.S. CFTC and the Department of Justice sued the state of Illinois to prevent it from regulating prediction markets.