Illinois Lawmakers Approve New Tax for Sports Contracts

Illinois lawmakers aren’t willing to give up on their fight against sports prediction markets.

The state has approved a new budget that includes a per-transaction tax on sports contracts offered by prediction platforms. Operators will be taxed at 1.75% for the first 5 million processed, but the rate jumps up to 3.5% after that. Lawmakers cited cuts to federal funding for the tax, as well as other changes the budget will make. 

While the budget has been approved, the state does not currently have the authority to impose and enforce the new tax on prediction markets.

Illinois Doubles Down on Per-Wager Tax

Last summer, Illinois lawmakers made big waves by adding a per-wager fee for mobile sportsbooks. This was in addition to a recent tax hike, leading many operators to push back. While all sportsbooks made changes to pass the new cost on to bettors, the market remains healthy one year later.

While the new tax for prediction markets is different, the overall proposal is the same as the per-wager fee. This not only brings in big money for the state but also helps smaller operators with fewer than 5 million transactions compete against industry giants. 

Sportsbooks won’t admit it, but their actions in Illinois show the industry is ultimately willing to accept the controversial tax.

Tax Can’t be Imposed on Prediction Markets…Yet

Despite Illinois approving the budget, the new tax on sports contracts won’t go into effect for some time.

Unlike sportsbooks, sports prediction markets are not considered to be a form of gambling. Instead, they are considered a form of market “swaps,” which puts them under the authority of the Commodity Futures Trading Commission. That means the federal regulator is the only one who can implement the tax proposed in the Illinois budget.

We expect the CFTC to file a second lawsuit against Illinois after its new budget was approved. However, there are dozens of other lawsuits over the industry’s legal status that will likely decide this fight.

CFTC Support Isn’t Stopping Opposition

As of today, the CFTC has filed lawsuits against Arizona, Connecticut, Illinois, Minnesota, New York, Rhode Island, and Wisconsin. The regulator hoped the initial lawsuits would lead lawmakers from other markets to drop their fight against sports contracts. However, the effort appears to be having the opposite effect.

Since the initial lawsuits were filed, lawmakers in Illinois, Rhode Island, and Tennessee have taken additional action against the sports betting industry. They continue to loudly reject the regulator’s argument that sports contracts are not gambling, willingly accepting the legal consequences. 

The continued opposition shows just how unpopular the industry is becoming in the US, and how little state lawmakers respect the current CFTC administration.