Illinois First-In-Nation Sports Event Contract Tax Signed Into Law

• Illinois Gov. J.B. Pritzker (D) has signed the state’s $56 billion 2027 budget into law
• The state budget includes the nation’s first “exchange wager” transaction tax based on sports event contracts
• Prediction market operators will be required to pay a new tax starting July 1 depending on the number of sports event contracts traded on their platform

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Illinois is close to becoming the first state to institute a tax on prediction market operators and sports event contracts traded on their platforms.

Gov. J.B. Pritzker (D) on Tuesday signed the state’s $56 billion 2027 budget into law. The budget includes a new tiered tax rate for prediction market operators and sports event contracts traded in the state.

The new sports event tax will go into effect on Wednesday, July 1.

Tiered Tax Rate Similar to Sports Betting

Illinois lawmakers approved the state budget and sent the document to Pritzker earlier this month.

The 2027 budget includes a new tiered tax rate for “exchange wagers,” which are defined in the budget document as “an agreement, contracts, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event.”

Prediction market operators will be required to pay a transaction tax equal to 1.75% for each exchange wager. After the first five million exchange wagers conducted by a prediction market operator during a fiscal year, the transaction tax will increase to 3.5%.

The exchange wager tax revenues will be deposited monthly into the state’s sports wagering fund.

It is a similar tiered system as to the state’s sports betting tax rate and per-bet fee policy. Licensed Illinois sports betting operators pay taxes based on the adjusted gross sports betting revenue totals:

• $0 to $30 million: 20%
• $30 million to $50 million: 25%
• $50 million to $100 million: 30%
• $100 million to $200 million: 35%
• $200 million and up: 40%

Illinois also requires licensed sports betting operators to pay a $0.25 transaction fee for its first 20 million bets taken in the state, which increases to $0.50 for every bet thereafter each year.

Illinois Legal Challenges Ongoing

Illinois is already a legal battleground for prediction markets. Illinois currently faces a lawsuit from the Commodity Futures Trading Commission (CFTC) regarding prediction markets and the trading of sports event contracts.

In its filed lawsuit in Illinois, CFTC counsel claimed the state “misapprehend both the nature of these contracts and the federal regulatory framework.”

“Event contracts, including sports-related event contracts that are listed on DCMs, are covered by the CEA, and the CEA prohibits States from invading the CFTC’s exclusive jurisdiction over event contract transactions offered by and executed on federally regulated DCMs. By prohibiting these DCMs from operating in Illinois without an Illinois license or by conditioning their operation on compliance with Illinois laws and regulations, Defendants directly interfere with Plaintiffs’ authority pursuant to the federal scheme imposed by Congress through the CEA.”

The lawsuit stemmed from the Illinois Gaming Board levying cease-and-desist notices to Kalshi, Crypto.com, and Robinhood in April 2025. The board ordered the prediction market companies to stop offering their sports event prediction contracts to Illinois residents.

It is more than likely a lawsuit will be filed prior to the July 1 start date to stop the new tax rate from going into effect.