In the face of state gaming regulators battling prediction market corporations, Illinois is taking a distinct strategy by trying to tax the trade.
The levy is a part of a brand new bundle, SB 3019, of tax hikes the legislature accredited Monday. It was a part of the state’s $55.9 billion fiscal 2027 funds. Illinois could be the primary state to formally tax the industry.
Since governments don’t tax unlawful merchandise, it additionally serves as a tacit admission that the platforms are authorized. However, Illinois is considered one of a number of states contending that the platforms violate state gaming legal guidelines.
Governor Says He Will Sign Bill
The Illinois invoice taxes prediction market sports activities contract at 1.75% for every wager for the primary 5 million transactions. Then, the state raises the speed to three.5% for each contract past that. Lawmakers exempted non-sports markets from the levy.
Legislators handed the invoice by a 73-41 margin within the Assembly and 36-19 within the Senate.
Along with the tax on prediction markets, the funds invoice would add new taxes on digital promoting, cryptocurrency, and social media platforms. The invoice additionally raises tax charges on massive firms although a change in how web working losses are handled.
Gov. J.B Pritzker mentioned he would signal the invoice.
“Every element of the budget for the upcoming fiscal year was thoroughly deliberated with the aim of achieving widespread affordability for all Illinoisans,” Pritzker mentioned. “It builds upon seven years of fiscal discipline and efforts to make our state competitive in national and international industries.”
Proposal Mirrors Tax Changes On Sports Betting
The transfer follows related efforts to lift taxes on sports activities betting operators over the previous few years.
In 2025, the state added a 25-cent tax on wagers for an operator’s first 20 million bets. It rose to 50 cents per wager past that threshold. The per-bet tax adopted a tax enhance in 2024 that instituted a progressive tax construction on operators as much as 40%.
Interestingly, lawmakers at the moment are contemplating a repeal of the per-tax wager after a major drop in betting.
Legal Battle Expected To Continue
The prediction market points of the funds invoice might convey extra authorized wranglings.
The Commodity Futures Trading Commission (CFTC) is adamant the physique ought to solely regulate the trade on the federal degree. It has sued New York over efforts to curtail prediction markets. The fee has taken related authorized actions towards Arizona, Connecticut, and Illinois.
In an announcement to Reuters on the time of these fits, CFTC Chairman Michael Selig mentioned the fee “will continue to safeguard its exclusive regulatory authority over these markets and defend market participants against overzealous state regulators.”
The go well with towards Illinois got here after the state tried to use state gaming legal guidelines to the trade. The CFTC named Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board within the lawsuit.
Questions On Tax Plan Remain
Beyond the courtroom battles, some questions stay unclear about how the state would interpret “bets” on a market. What would occur to merchants who promote their positions earlier than a market is concluded? Would the state tax each the entry and exit transfer?
Answers to these questions aren’t but recognized. It’s additionally unknown if the tax would even be allowed as soon as the federal authorities’s go well with towards the state is resolved.
The transfer to tax the trade might additionally undercut states’ authorized arguments that sports activities contracts circumvent state gaming legal guidelines. Kalshi has been concerned in lawsuits with a number of states, together with in Massachusetts, the place a decide not too long ago railed towards the corporate in state courtroom. In April, nonetheless, a federal appeals courtroom dominated that Kalshi might nonetheless provide sports activities occasion contracts in New Jersey.
The trade has additionally obtained important scrutiny from federal lawmakers. In March, Sen. John Curtis (R-Utah) filed a invoice to ban the businesses from providing occasion contracts mimicking sports activities betting and different “casino-style” video games.
