- Illinois’ 2027 state budget includes a tax on prediction markets, which would make it the first state to impose such a tax.
- Kentucky passed similar legislation to tax prediction markets but has already been met with a lawsuit from operators.
- Illinois is already battling the US Commodity Futures Trading Commission in court because of previous cease-and-desist notices sent to prediction market operators.
SPRINGFIELD, Ill. – The 2027 state budget for Illinois includes a new and unprecedented change, which would apply a tax to prediction markets in the state.
The $56 billion budget includes a tiered tax rate which will apply to prediction markets, implementing a 1.75% tax for each of the first five million exchange wagers in a fiscal year, then increasing to 3.5% for all following wagers. The tax is set to officially take effect on Wednesday, July 1st.
In addition to the new tax, the budget includes language that requires prediction market operators to receive a license to operate in the state, adding another hurdle for companies to clear.
Kentucky passed a similar tax law but was swiftly met with a lawsuit from a coalition composed of three of the biggest prediction market platforms – Kalshi, Polymarket, and Crypto.com.
Prior to these two states passing legislation, no other state had ever attempted to impose a tax on prediction markets, though many states are currently in legal battles pertaining to prediction market regulation.
Legal Battles Already Underway
The coalition is suing the state of Kentucky for attempting to implement a tax on prediction markets that is set to take effect in January of 2027, so it would be unsurprising to see them do the same for Illinois in the coming days given the fact that the new tax is just a few weeks away from beginning.
In addition to this, Illinois is already facing a lawsuit from the US Commodity Futures Trading Commission (CFTC) after the state sent cease-and-desist notices to multiple prediction market operators.
The state believes that prediction markets should be treated equally or similarly to traditional legal sports betting sites, while the CFTC and prediction market operators maintain that they should be treated closer to the stock market, citing protections from the Commodity Exchange Act (CEA).
