Is Coinbase legal in Illinois?

Coinbase Financial Markets, Inc. filed its complaint in the Northern District of Illinois on December 18, 2025 (No. 1:25-cv-15406). It sued Illinois's attorney general and the Gaming Board's chairperson, members and administrator, each in an official capacity. The day before, Coinbase had announced a partnership with Kalshi to let its customers trade Kalshi's contracts (¶ 56), and the complaint says that "Beginning in January 2026, Coinbase will offer event-contract trading to its customers throughout the United States, including in Illinois" (¶ 3).

The suit is pre-enforcement: Coinbase says it "expects Defendants to imminently bring an enforcement action against it" (¶ 7). As its evidence, the complaint points to the Gaming Board's April 1, 2025 letters to Kalshi, Robinhood and Crypto.com (¶ 58), an April 25, 2025 letter from the Board's administrator to the CFTC (¶ 60), and an October 23, 2025 public letter addressed to "all licensees, applicants and stakeholders" (¶ 61). As the complaint quotes that letter, parties who "participate in or facilitate" sports event contract trading without a license are "engaged in illegal gambling". None of the letters the complaint cites is addressed to Coinbase, and the characterizations are Coinbase's.

The Board's cease-and-desist page, read on October 24, 2026, lists no letter to Coinbase. Its letter to Kalshi directs "Kalshi and anyone affiliated with its operations" to cease and desist, and the court later wrote that Illinois "has threatened to enforce these provisions against entities like Coinbase" (opinion p.21).

Coinbase asks for two things (complaint p.39): an injunction barring the officials from enforcing the Sports Wagering Act, the Criminal Code and related rules against Coinbase, and a declaration that those laws are preempted insofar as they would stop Coinbase offering customers access to event contracts traded on a designated contract market.

Judge Martha M. Pacold set the briefing in a December 30, 2025 order and heard argument on Coinbase's motion in February 2026 (opinion p.24). The CFTC and Kalshi filed their own suits after that argument, agreed to stand on the briefs, and the court decided all three requests in one memorandum opinion without a second hearing (p.3). Coinbase's motion was "granted in part and continued in part consistent with this memorandum opinion and order" (p.28).

The points that turn on Coinbase:

• What Coinbase does. The court describes it as offering "a virtual wallet in which users can hold cryptocurrency", partnered with Kalshi so that its "one hundred million users can buy and sell contracts listed on Kalshi's platform" (p.3).
• What was decided. Both sides argued over a bet on who wins a title game, so the court limited itself to that kind of contract and tailors relief to it (p.8). It found those title contracts "likely" swaps under the federal definition, a preliminary finding (pp.9, 28), and Illinois's licensing rules and the criminal provision behind them "likely" preempted (pp.21-22, 25).
• A limit Coinbase accepted. At argument, Coinbase agreed that a bet on what color sports drink is poured on a coach after a Chicago Bears win is not a swap, and the court said it "was right to admit as much" (p.13).
• Timing. Illinois argued Coinbase "inexplicably . . . decided to file this lawsuit at the last minute and demand instant relief." The court disagreed: Coinbase sued after it "announced its partnership with Kalshi in December 2025", and before then it "likely lacked standing" (p.26).

Illinois's arguments are in the opinion too. The state read "event" in the federal swap definition to mean the game itself, not who wins it (p.10). It argued that a CFTC rule already bars gaming contracts from listing, so its law adds nothing (p.22). And it said unregulated sports wagering is "particularly addictive and especially attractive to young people" (p.27). The court answered the last point that "Congress assigned those considerations to the CFTC, not the courts" (p.27).

The ruling is preliminary. The docket we read, last checked October 16, 2026, directs the parties to "confer and file a proposed injunction" by October 29, 2026 (docket). We found no injunction entered and no later ruling, but that docket can lag the court's own system.

Coinbase brought the same kind of suit against Michigan and Connecticut on the same day, and both of those courts denied it a preliminary injunction. In Michigan, the court wrote on August 7, 2026 that "Coinbase fails to show that sports event contracts qualify as swaps under the CEA" (amended order, p.29). In Connecticut, the court denied Coinbase's motion on August 10, 2026, "largely in line with" its ruling in Kalshi's case there (order, p.1). Coinbase appealed both: to the Sixth Circuit from the Michigan order (notice of appeal), and to the Second Circuit in Connecticut, where a September 3, 2026 order in No. 26-2297 lists Coinbase as appellant. Coinbase in Michigan and Coinbase in Connecticut follow those appeals.

The Chicago opinion works from Seventh Circuit precedent, which it reads to rule out express and field preemption and to leave only conflict preemption (pp.8-9), and it notes the Ninth Circuit's contrary reading of express preemption in a Nevada case (p.9). The courts disagree, and we found no appeals court ruling in Coinbase's Illinois case.

Nothing in the opinion or the complaint addresses withdrawals, deposits or open positions, and no order in the case restricts customer accounts. The complaint describes the setup: Coinbase customers place orders through their Coinbase accounts, the trades are executed on Kalshi's CFTC-designated exchange and settled through Kalshi's clearinghouse, and Coinbase holds customer funds in segregated accounts (¶ 56, pp.22-23).

We could not confirm from a primary document which contract categories Coinbase offers Illinois residents today. The October 2 findings cover the title-game contract the parties argued over, not every market Coinbase lists. Robinhood, which received its own Gaming Board letter on April 1, 2025, is not a party to any of the three cases.

After the February argument, Illinois added a transaction fee on "exchange wagers" tied to sporting events, which the opinion says was enacted in June 2026 (p.26). The court summarizes it as 1.75% of a prediction market or exchange's first five million exchange wagers and 3.5% of later ones in the same fiscal year, on top of a 15% fee on gross sports wagering receipts and a 25 or 50 cent fee on each wager (p.3). The opinion does not say which company would pay it; the statute is covered on Kalshi's Illinois page.

The court did not rule on the fees. Its preliminary view is that "Taking a cut of Kalshi and Coinbase's profits, without more, might not pose the same conflict as regulating an entire market", but that "What defendants cannot do overtly, they cannot do covertly" (p.24). It said the plaintiffs' burden on the fees "has not yet been satisfied" and asked for targeted argument and, if the parties want, evidence (p.24).

The docket we read sets October 29, 2026 for the proposed injunction, and the fee briefing follows. Any appeal would go to the Seventh Circuit. We found no ruling after October 2 and no notice of appeal by Illinois, but the docket we read, last checked October 16, 2026, may lag. Coinbase's status in every other state is on the Coinbase legal page.

The October 2 opinion decides who may license these contracts in Illinois under state gambling law and federal commodities law; it is not a ruling on federal income tax, and the IRS has issued no guidance on event contracts. How the people we've seen file report them, whether as gambling, capital gains on Form 8949 or Section 1256 contracts on Form 6781, is laid out in the prediction market tax guide.