Illinois Sets New Tax on Prediction Markets, Mimicking Sports Betting Structure

Illinois has made history by becoming the first state to officially tax the prediction market industry. This move is part of a broader budget bill, SB 3019, which includes various tax hikes approved by the legislature on Monday. The new tax structure mirrors that of sports betting, with a 1.75% tax on each wager for the first 5 million transactions, increasing to 3.5% for every contract beyond that.

Governor J.B. Pritzker has announced his intention to sign the bill, emphasizing that every element of the budget for the upcoming fiscal year was thoroughly deliberated with the aim of achieving widespread affordability for all Illinoisans. He also highlighted that the budget builds upon seven years of fiscal discipline and efforts to make the state competitive in national and international industries.

The Commodity Futures Trading Commission (CFTC) has been actively involved in legal battles with several states, including Illinois, over the regulation of prediction markets. The CFTC has sued New York, Arizona, Connecticut, and Illinois, asserting its exclusive regulatory authority over these markets. The legal wranglings are expected to continue, with questions remaining about how the state will interpret “bets” on a market and the potential impact on traders who sell their positions before a market is concluded.