New Illinois Budget Adds Tax on Sports Prediction Markets

The sports prediction market industry has yet another fight on its hands.

Illinois lawmakers have approved a new state budget that contains a new tax on sports contracts. This offering from prediction markets will incur a 1.75% tax per transaction. The rate will jump to 3.5% after the first five million transactions in a fiscal year. 

The new taxes closely resemble the per-wager fee the state implemented for sportsbooks last summer. This led to intense blowback from the sports betting industry, but the overall health of the Illinois online sports betting market has remained strong one year later. 

While the new tax is similar, the fight over it will look far different.

As of today, the Commodities Futures Trading Commission is the only regulator with authority over the industry. That means individual states can’t tax or regulate sports prediction platforms, making the budget’s new tax unenforceable. 

In a press release announcing the budget’s approval, many lawmakers claimed that the changes made are necessary to offset federal funding cuts. 

“In the face of economic uncertainty and devastating federal cuts, Illinois chose stability, responsibility, and compassion,” Senate President Don Harmon shared in the release. “This budget strengthens support for working families, protects access to hospitals and health care, invests more than 300 million new dollars in public education, and provides relief for parents through a sales tax-free shopping holiday, and it does it all without raising the state income tax or sales tax.”

CFTC’s Strongarm Tactics Are Falling Flat

The CFTC has become far more protective of sports prediction markets since Michael Selig took over as chairman. He has used the federal regulator to file lawsuits against states that take action against the industry. So far, the CFTC has taken seven states to court, including Illinois.

While the regulator is attempting to stop states from pursuing legal action against prediction operators, it hasn’t worked well. Rhode Island stepped up its action last week despite the threat of a lawsuit from the CFTC, and Illinois is now doubling down on its fight. 

States led by Republicans have avoided the wrath of the regulator, but several have begun to take legal action against the industry. That includes Tennessee, where lawmakers continued their fight last week. 

With so many states continuing to push back, it is clear that many state lawmakers aren’t shying away from a fight with the CFTC.