The U.S. District Court for the Northern District of Illinois Eastern Division granted motions from Kalshi , Coinbase, and the Commodity Futures Trading Commission for a preliminary injunction against the state to prohibit Illinois from enforcing its gaming laws against prediction markets .

Judge Martha M. Pacold granted the motion on Friday, Oct. 2, creating an intra-circuit split with the U.S. District Court for the Eastern District of Wisconsin. The Wisconsin federal court denied a Commodity Futures Trading Commission’s (CFTC) motion in July for a preliminary injunction in the Badger State.

Pacold’s ruling allows the prediction market operators to continue offering sports event contracts in the state, but also seemingly supported the legality of the Illinois decision to tax operators for their contracts.

At issue at most of the lawsuits regarding state gambling laws and prediction operators is the basic question of whether or not event contracts can be qualified as “swaps” under the Commodity Exchange Act (CEA).

Pacold’s ruling determined event contracts are “most likely” swaps under the CEA and the plaintiffs have demonstrated they will be “irreparably harmed” without a preliminary injunction.

“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. Under the Act and precedent interpreting it, some Illinois law is likely preempted. Plaintiffs are therefore likely to succeed—at least in part. Plaintiffs have also demonstrated that they will be irreparably harmed without an injunction, and that the other equitable factors favor issuing an injunction,” Pacold wrote.

The plaintiffs, Pacold noted, demonstrated that Kalshi is a designated contract market, that its sports event contracts are swaps, and that Illinois is likely attempting to “exercise control over Kalshi’s sale of those ‘swaps’.” Much of Illinois law also likely conflicts with the CEA and is likely preempted as well.

While Pacold did grant the preliminary injunction motion, she also noted that the Illinois tax for prediction market operators may be different than trying to regulate an entire market.