Illinois Passes $56 Billion Budget with Prediction Market, Fantasy Sports Tax

Illinois lawmakers have approved a $56 billion budget for the 2027 fiscal year early Monday morning, after working into overtime on the last day of the spring session. As part of the budget, a new tax on sports-event prediction market contracts was introduced. The budget also introduces a new regulatory framework for daily fantasy sports (DFS).   

The changes were included in Senate Bill 3019, which was passed at the same time as the budget, which amends the state’s Sports Wagering Act to add “exchange wagers”, which are defined as agreements, contracts, transactions, or swaps linked to a sports event.  

Under the bill, each wager will be subject to a 1.75% transaction tax, which will rise to 3.5% once a licensee exceeds five million exchange wagers in a fiscal year. The bill also reduces the initial Illinois sports betting license fee for online operators from $20 million to $15 million, and keeps the existing $250,000 nonrefundable application fee.  

The budget package also establishes a separate regulatory framework for DFS under the state’s gaming regulator, the Illinois Gaming Board. Fantasy contest operators will be classified as either small operators serving 7,500 or fewer patrons or large operators serving more than 7,500 patrons. 

Small operators will pay a $500 initial license fee, while large operators will pay $7,500. Licenses will remain valid for two years. Operators will also be required to pay a 15% tax on adjusted gross fantasy contest receipts and implement age verification, geolocation controls, anti-money laundering procedures, and identity verification measures. 

The enacted budget does not include Governor J.B. Pritzker’s earlier proposal to align casino table-game tax rates with those applied to slot machines. 

CFTC Files Lawsuits against Arizona, Connecticut, and Illinois 

Illinois has been at the forefront of the debate over the regulation of prediction markets, and the Commodity Futures Trading Commission (CFTC) recently included the state in its slate of lawsuits.  

The federal agency, which oversees prediction market apps, filed actions in federal district courts in Arizona, Connecticut, and Illinois, and asked the courts to declare state gambling laws unconstitutional and invalid when applied to prediction market activity. 

The three states have all taken action against prediction market operators over the past year. Arizona filed criminal charges against executives of prediction market operator Kalshi, while all three states issued cease-and-desist orders to companies operating in the sector. 

The Chairman of the CFTC, Michael Selig, said the commission had exclusive regulatory authority over prediction markets and argued that a patchwork of state regulations could increase risks of fraud and market manipulation. 

State officials disputed the federal government’s position. Connecticut Attorney General William Tong said the contracts offered by prediction market companies constitute unlicensed gambling under state law. Illinois officials said the state would continue defending its consumer protection and gaming oversight powers.