Illinois lawmakers have signed off on a budget measure that would create what appears to be the first state tax aimed specifically at sports event contracts traded through prediction markets. The provision was included in the wider revenue package contained in Senate Bill 3019, which cleared both chambers on June 1.

Under the legislation, “any wagers offered under this Act shall be subject to incur a transaction tax equal to 1.75% of each exchange wager.” The bill also establishes a higher rate for operators with significant activity. After a licensee reaches five million exchange wagers during a fiscal year, the transaction tax imposed under this subsection shall increase to 3.5% of each exchange wager.

Rather than taxing operator revenue, the proposal is built around transaction volume. Revenue generated by the tax would flow into the Sports Wagering Fund before ultimately being transferred to the state’s General Revenue Fund. The legislation states that the tax “shall be deposited monthly into the Sports Wagering Fund” and outlines the transfer process for certified amounts.

Analysis circulated by Fairplaygov indicates that the measure would apply to sports-based event contracts, while non-sports prediction markets would not be subject to the same tax structure.

Illinois puts prediction markets in the spotlight with new tax

The move lands in the middle of an ongoing fight over who should regulate prediction market products tied to sporting events. Companies operating those markets have consistently argued that their offerings fall under federal oversight through the Commodity Futures Trading Commission rather than state gaming authorities.

Fairplaygov has suggested the Illinois measure could invite another round of legal challenges from the industry. The organization noted that the CFTC has already taken legal action involving Illinois Governor J.B. Pritzker, Attorney General Kwame Raoul, and the Illinois Gaming Board as disputes over prediction market activity continue.

The new exchange-wager language is only one section of a much larger bill. According to the legislative summary, SB 3019 “amends the Illinois Gambling Act” and “amends the Sports Wagering Act,” including revisions involving “the privilege taxes imposed under the Act.”

The package also includes a 10% tax on targeted advertising services, a Digital Asset Tax Act that would impose a 0.2% levy on certain digital asset transactions, and new fees tied to large social media platforms based on Illinois user totals.The prediction market provision arrives as Illinois continues to explore new gambling-related revenue streams. We previously highlighted criticism surrounding other betting tax proposals in the state, including per-bet tax measures that opponents argued could reduce wagering activity and place added pressure on operators and consumers.

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