Illinois Lawmaker Moves to Scrap New Prediction Market Tax Amid Kalshi Lawsuit
A bill filed in Illinois would kill a months-old tax on sports prediction markets, but leaves the state's fight with Kalshi and the CFTC unresolved.
This article was produced with AI assistance and edited by the ON360 newsroom.
An Illinois lawmaker wants to scrap a tax on sports prediction markets barely three months after it took effect, as the state fights separate lawsuits from Kalshi, the Commodity Futures Trading Commission and Coinbase over who gets to regulate the sector.
Republican Rep. Travis Weaver filed HB 5811 on Wednesday, according to Gambling Insider. The bill would strip Illinois’ Sports Wagering Act of its definition of an “exchange wager” and repeal the transaction tax attached to it.
What the tax charged, and why it’s under fire
Illinois added the exchange-wager tax through SB 3019, part of its FY2027 budget package signed by Gov. JB Pritzker. It applied to contracts, swaps or transactions tied to sporting events and traded on prediction market platforms, charging 1.75% on a platform’s first five million exchange wagers in a fiscal year and 3.5% on every wager after that.
The same law forced prediction market operators to obtain state gambling licences, a requirement Kalshi has resisted in multiple U.S. states by arguing its exchange is federally regulated and exempt from state gambling frameworks.
Three lawsuits, one unresolved question
The CFTC sued Illinois in April, months before the tax existed, challenging the state’s attempt to apply gambling law to prediction markets at all. Once Pritzker signed the budget, the agency amended its complaint to target the new tax specifically.
Kalshi filed its own suit in June, after the tax and licensing regime took effect. It argues federal commodities law preempts Illinois’ rules, and separately objects to being subjected to the state’s sports wagering licensing and geolocation requirements.
Coinbase is fighting Illinois too, in a case filed in December 2025 that predates the exchange-wager tax entirely. None of the three cases has been resolved.
Sportsbook taxes untouched
HB 5811 would not touch Illinois’ existing sportsbook tax structure. That regime taxes adjusted gross sports wagering receipts on a graduated scale from 20% to 40%, on top of a per-wager fee of 25 cents for each of an operator’s first 20 million annual wagers, rising to 50 cents beyond that threshold.
Repealing the exchange-wager tax would remove one flashpoint from the litigation, but it would not settle the broader jurisdictional fight over whether states or federal regulators control prediction markets tied to sports. That question could still end up before the Supreme Court.
Canadian regulators have so far taken a different route. Ontario and other provinces keep sports and entertainment betting out of prediction markets entirely, sidestepping the state-versus-federal fight now playing out across several U.S. jurisdictions.
Related: Canadian Regulators Keep Sports and Entertainment Betting Out of Prediction Markets
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