Illinois‘ new tax on sports prediction markets is already the subject of court challenges. Now, a state legislator wants to kill the plan altogether.
Republican Rep. Travis Weaver filed House Bill 5811 this month, legislation that would repeal the new tax on “exchange wagers” that was approved as part of the new state budget at the start of June.
As well as abolishing the yet-to-be-enforced tax, Weaver’s legislation would also remove the new definition of “exchange wager”, which the budget bill legally defined within Illinois sports wagering framework as “an agreement, contract, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event.”
The budget, signed by Gov. JB Pritzker on June 16, included the late addition of a per-wager tax of 1.75% on all sports trades made within the state on prediction market platforms. After the first 5 million sports exchange wagers processed on a platform during the fiscal year, that rate would double to 3.5% for the rest of that same year.
Weaver’s opposition follows party lines
The new prediction market tax was one of five new taxes approved by the Democratic-majority Illinois General Assembly this year, along with levies on fantasy sports, digital advertising, cryptocurrency, and social media platforms.
Speaking to SBC Americas by phone, Rep. Weaver criticized the state’s Democratic leaders for introducing a slate of new taxes that he argued were not properly considered or evaluated. He also cast doubt on whether Illinois has the legal standing to tax things such as prediction markets.
“Typically, you would include a tax in a budget because you think it will raise money, but they actually didn’t include any revenue in the budget for many of these taxes,” Weaver said. “Instead, they included money in the budget for the attorney general to defend them because they’re not even sure if these taxes are legal. I think a lot of these things fit under federal interstate commerce and should be handled at the federal level.
“I also think that gamblers in the state of Illinois are taxed an insane amount. Look at what we have for online sports wagering. Every time the budget’s a little bit short, we go to the pocket of sports bettors. I think it’s ridiculous that we’re inventing brand-new, first-in-the-nation taxes to get even more money out of the sports betting market.”
The Illinois legislature is currently in recess before the 2027 session begins in mid-January, but there is a short veto session in late November and early December.
“In this little window, where we’re finding out if they’re legal or not before they’re collecting any revenue, now is when we’re going to have the best chance to kill them,” Weaver said.
Illinois first used per-wager tax on sportsbooks
Weaver was referencing Illinois’ notable state-regulated sports betting tax changes of the last two years:
- Effective July 1, 2024, Illinois changed from a flat sports wagering tax of 15% of revenue to a sliding scale that starts at 20% and stretches all the way up to 40% at the highest level
- Effective July 1, 2025, Illinois began charging online sportsbooks a per-wager tax of 25 cents per bet, rising to 50 cents per bet after the first 20 million wagers in a fiscal year
The per-wager sports betting tax, which the new prediction markets tax loosely replicates, prompted all 10 of Illinois’ licensed sportsbooks to either implement a customer surcharge or a new minimum bet amount. It also sparked copycat bills from lawmakers in other states.
In a similar fashion to Weaver’s bill, some prominent state legislators introduced attempts to repeal the per-wager betting tax earlier this year.
Illinois fighting multiple prediction market court cases
Weaver filed his bill to repeal the exchange wager tax amid legal challenges from the prediction markets industry.
Kalshi took Illinois to court in the wake of Pritzker signing the state budget, contesting not only the tax but the state’s intention to require companies offering sports event contracts to pay millions of dollars to obtain state licenses. Kalshi argued in a court filing that Illinois does not have the authority to implement those requirements, as event contract regulation is the exclusive federal jurisdiction of the Commodity Futures Trading Commission (CFTC).
Incidentally, the CFTC sued Illinois, as well as Arizona and Connecticut, in April, accusing the states of “overzealous” attempts to enforce state gambling laws on its registered firms. The federal regulator subsequently amended its court complaint against Illinois after the new state budget was signed to also challenge the prediction markets tax.
Weaver’s bill focuses purely on the exchange wager tax measure of the budget. It does not address the wider licensing and regulatory measures that the state intends to impose upon prediction markets.
Can states tax federal prediction markets?
Illinois is one of three states to have formally approved some kind of taxation of sports event contracts in 2026. Kentucky also passed a law to tax, license, and regulate prediction markets earlier this year, and was quickly sued by several registered designated contract markets (DCMs) and separately by the CFTC.
Meanwhile, North Carolina passed legislation to tax prediction markets beginning on Jan. 1, 2027, but without licensing or other regulatory requirements. Unlike Illinois and Kentucky, the Tar Heel State has not been challenged in court over its plan.
Holland and Knight LLP Partner and gaming attorney Josh Kirchner told SBC Americas last month that states are able to tax federal activity in some cases, but that things become trickier when a state is also attempting to impose its own regulation on those activities.
“How far can [a state tax] go before you reach the point of saying this is a stand-in for regulation that attempts to preempt federal law?” Kirschner said. “Those [Illinois and Kentucky] statutes certainly go above and beyond purely tax. In North Carolina, we’re really parsing the fine points of what is the difference between a tax regime that is not meant to be punitive and a tax that’s a stand-in for a regulatory regime.”
