Illinois senator proposes prediction market regulation with 50% tax
Table of contents
- Illinois Senate Bill 4168 would require prediction market platforms to obtain a $1 million annual license.
- Operators would pay 50% tax on adjusted gross revenue under the proposed legislation.
- The bill represents Illinois’ second regulatory effort targeting prediction markets this year.
Illinois lawmakers are reviewing legislation that would place prediction market operators under state oversight while imposing substantial tax obligations on platform revenue.
Senate Bill 4168 proposes a licensing framework for trading exchanges offering event contracts, enforcement mechanisms, and a revenue tax that matches rates applied to other forms of gambling in the state.
The proposal arrives as prediction markets expand across the United States. Platforms including Kalshi and Polymarket allow users to trade contracts linked to real-world outcomes spanning elections, economic data, and entertainment events.
Illinois Gaming Board gains oversight authority
Sen. Michael Hastings introduced the Prediction Market Regulation and Taxation Act on 5 March. The legislation would require companies offering event contract trading to secure a master license before operating in Illinois.
License holders would pay $1 million annually with mandatory renewal each year. The Illinois Gaming Board would oversee compliance and enforcement once platforms obtain licenses.
Under the proposed framework, exchanges would remit tax equal to 50% of adjusted gross revenue generated from Illinois residents. The tax provision aims to ensure prediction market companies contribute revenue comparable to other gambling operations in the state.
Operators offering event contracts without required licenses could face classification as illegal gaming activity under Illinois law. The Gaming Board would gain authority to issue cease-and-desist orders against unlicensed platforms.
Second Illinois bill targets prediction markets
Senate Bill 4168 marks the second legislative effort in Illinois this year addressing prediction market regulation. Rep. Edgar Gonzalez Jr. introduced House Bill 5059 in early February under the title ORACLE Act.
The ORACLE Act establishes a broader regulatory structure for event contract platforms. Provisions cover minimum age requirements, prohibitions on certain market types, and responsible gaming protections designed for prediction market participants.
The proposal is set to receive its first reading on 10 February before assignment to the Illinois House Gaming Committee for review. Both bills highlight intensifying legislative focus on prediction markets as the sector grows alongside sports betting and other regulated wagering activities.
Federal oversight claims disputed
Prediction market operators including Kalshi and Polymarket maintain that federal law already provides regulatory oversight through the Commodity Futures Trading Commission. These companies argue event contract trading falls under commodities market regulation rather than state gambling statutes.
Under this interpretation, platforms assert they can operate nationwide while complying with federal requirements without seeking individual state approvals. Several states have begun evaluating whether additional state-level regulation should apply to prediction market platforms serving local users.
An American Gaming Association poll released in September found that 80% of U.S. voters believe sports prediction markets should follow the same rules as sportsbooks. The survey reflected growing public concern over regulatory gaps in the prediction market sector.
National regulatory debate intensifies
Discussion around prediction market oversight extends beyond state legislatures. On the same day Illinois lawmakers introduced Senate Bill 4168, two U.S. senators filed separate federal legislation targeting prediction market use by government officials.
The federal proposal would prohibit public officials including the President, Vice President, and members of Congress from participating in prediction markets for financial gain. Supporters argue public officials could possess insider information influencing trading activity.
Illinois now joins states including Iowa, New York, New Jersey, and Connecticut in examining legislative responses to the expanding prediction market industry.
The outcomes could shape how event contract platforms operate across multiple jurisdictions as operators like Underdog and PrizePicks shift their business models toward prediction market offerings.
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