Illinois Governor signs prediction market tax into law

• Illinois Governor JB Pritzker signed the state’s $55.9 billion FY2027 budget on June 18, making Illinois the second state to impose a tax on prediction markets.
• Senate Bill 3019 sets a tiered transaction tax on exchange wagers of 1.75% on the first five million placed in a fiscal year, doubling to 3.5% beyond that threshold.
• The levy takes effect July 1, despite an active federal lawsuit filed against the state by the Commodity Futures Trading Commission.

Illinois became the second state to tax prediction market operators after Governor JB Pritzker signed the state’s $55.9 billion FY2027 budget on June 18. The new levy on sports-event exchange wagers takes effect July 1.

Senate Bill 3019 amends Illinois’ Sports Wagering Act to bring “exchange wagers” within the scope of regulated betting, alongside existing wager types such as moneylines, point spreads, and over/under bets.

The definition covers any agreement, contract, or transaction executed on a prediction market tied to a sporting event.

How the tax works

Each exchange wager placed in Illinois will carry a 1.75% transaction tax. Once a licensee surpasses five million wagers in a fiscal year, the rate doubles to 3.5%.

The structure mirrors the per-bet sportsbook tax Illinois introduced in 2025, which was similarly calculated by transaction volume rather than adjusted gross receipts. Lawmakers are separately weighing a repeal of that sportsbook levy following a reported decline in handle.

JB Pritzker, Governor of Illinois, said:

“I’m proud to sign Illinois’ eighth consecutive balanced budget – one that lowers costs for everyday Illinoisans, protects our state’s fiscal health, and continues our economic progress.”

CFTC dispute deepens

The decision to tax prediction markets carries an inherent legal contradiction. Governments do not typically levy taxes on illegal products, meaning the new law is widely interpreted as a tacit recognition that operators like Kalshi, Polymarket, and Crypto.com have some right to operate.

Illinois has maintained the opposite position in court. In April 2025, state regulators sent cease-and-desist letters to those same operators, arguing sports-event contracts constitute unlicensed gambling under state law.

The Commodity Futures Trading Commission countered by suing Illinois alongside Arizona, Connecticut, New York, and Wisconsin, claiming exclusive federal jurisdiction over licensed derivatives exchanges. Coinbase filed a separate legal challenge against Illinois, Michigan, and Connecticut in December 2025.

SB 3019 does not specify how licensing requirements would apply to federally regulated operators, leaving that question for courts to determine.

DFS regulation arrives

SB 3019 also creates Illinois’ first formal regulatory framework for daily fantasy sports under the Illinois Gaming Board.

The legislation establishes two operator tiers. Small operators serving 7,500 or fewer patrons pay an initial license fee of $500. Large operators serving more than 7,500 patrons pay $7,500. All licenses run for two years, and both categories face a 15% tax on adjusted gross fantasy contest receipts.

Rep. Curtis Tarver noted during legislative debate that fantasy operators themselves requested the regulated framework. Major providers active in the state include DraftKings, FanDuel, and Underdog. Operators must also implement age verification, geolocation controls, and anti-money laundering procedures under the new rules.

Separately, SB 3019 cuts the initial master sports wagering license fee for online operators from $20 million to $15 million.

Kentucky was the first state to tax prediction markets, at a rate of 14.25%, and already faces legal action from a coalition of operators including Kalshi, Crypto.com, and Polymarket. New Jersey is also considering a similar approach, with a pending bill that would apply the state’s existing 19.75% wagering tax plus a 10% surcharge to sports-event contracts.

The AGA has argued that prediction markets have already cost regulated gaming more than $1 billion in tax revenue, a figure the industry has contested.

A court ruling that affirms state authority over these platforms could consolidate tax-and-regulate as a credible national model. A federal loss would likely render the new levy unenforceable before it generates any meaningful revenue, and sharpen the case for a congressional resolution to the jurisdictional standoff.