Illinois Targets Prediction Markets With New Per-Wager Tax

May was a tough time for Kalshi and other prediction market operators, with lawsuits flying in all directions, scrutiny growing over insider trading claims and the fever pitch for the FIFA World Cup reaching a boiling point. Outside the US, it has also been the subject of legal headaches, with Brazil outright banning Kalshi and other prediction markets. And then, barely 2 weeks before the World Cup starts, Spain followed suit. This year has been equally lucrative and destructive for prediction markets, and questions about their longterm future are still there. Only it is not about whether or not prediction markets can maintain momentum among the customers – that much is obvious from their lasting appeal – it is more a question of whether or not they will buckle from legal pressures and shake off the ever growing noise about insider trading.

To kick off June, the state of Illinois has approved Senate Bill 3019, adding “exchange wagers” to the types of sports bets that are recognized under state law.

Prediction markets will be given some legal leeway here, but it comes with a cost. Literally, a cost. By Illinois law, every wager placed on a prediction market will be subject to a 1.75% transaction tax, which increases to 3.5% after the licensee exceeds 5 million exchange wagers in a year.

Illinois Adds Exchange Wager to Tax Laws

This news comes barely a week after the news that Minnesota proposed an outright ban on prediction markets. Minnesota set a precedent in the US, becoming the first state to formally take action against the prediction markets, making it a crime to host or advertize these platforms. Counter suits were sent to the state authorities the very next day.

Now, Illinois has seemingly accepted prediction markets, but this formal recognition comes with its own territory. For Illinois has a per bet tax on US sportsbooks, and now it has extended this to prediction markets. Every single contract that is bought on a prediction market will be subject to:

• A 1.75% tax up to first 5 million “wagers”
• Increases to 3.5% for every “wager” after first 5 million

Senate Bill 3019 changes the wording in the Illinois Sports Wagering Act, to include exchange wagers – under which prediction markets will be classified. This definition states “an agreement, contract, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event”.

Taxation of DFS and Sportsbooks

The legislation also recognizes DFS platforms, giving them issue to worry about with license fees and a 15% tax on gross revenue. The license fees will be contingent on how many patrons the DFS platform serves, with those that have more than 7,500 registered user accounts paying a much larger license fee. However, real money US sportsbooks are given a considerable concession. The license fees for online operators will be slashed from $20 million down to just $15 million.

• DFS platforms:
  • Up to 7,500 active accounts: $500 initial license fee
  • Above 7,500 active accounts: $7,500 initial license fee
• Sportsbooks:
  • $15 million license fee, down from $20 million
• Sportsbook Tax:
  • 20% for first $30 million
  • 25% on revenue between $30 and $50 million
  • 30% on revenue between $50 and $100 million
  • 35% on revenue between $100 and $200 million
  • 40% on revenue above $200 million

Illinois has some of the most complex taxation models for US sportsbooks. It has an adjustred gross revenue, progressive taxation system. Operators pay 20% up to their first $30 million, and this increases in increments of 5% up to 40%, which is for tax receipts above $200 million.

Per Bet Tax on IL Sportsbooks

On top of that, it also has a per-wager bet, which is a one of a kind tax on every single wager placed at the platform. The per-bet tax is:

• $0.25 for first $20 million processed wagers
• $0.50 for all wagers after first $20 million

This tax scheme was introduced in July of 2025, much to the outrage of many Illinois bettors. In fact, the state recorded 4 months of continuous decline in the sports betting handles.The NFL bets during the Super Bowl, and the following 2026 March Madness betting handles, were actually fractionally lower than the same events in 2025. For contrast, across the rest of the US, this was the biggest Super Bowl betting handle in history, and March Madness also shattered its previous records.

Some lawmakers have realized this declining trend and have proposed to solve the problem. House Bill 5143 was introduced in February to end the per-bet tax in Illinois, with a projected deadline of July 1. The deadline is drawing near and the bill is still on the table, but it has not moved since its first reading back in February.

Illinois’ Stance on Prediction Markets

The Commodity Futures Trading Commission, which regulates prediction markets at a federal level, has already crossed swords with Illinois. Previously, the state sought class actions on behalf of 100+ people on the basis that prediction markets like Kalshi and Polymarket have caused damages exceeding $5 million. It sent cease and desist letters, claimed prediction markets were illegal gambling, and cited the Loss Recovery Act – an act meant to discourage illegal gambling. This act basically enables gamblers who lose over $50 in illegal bets to sue the platform that provided the wagers. That is, for the first 6 months of having made those bets. After 6 months passes, another plaintiff (anyone acting on behalf of the gambler) can sue the platform for three times the amount of the losses.

This new regulation seems to contradict Illinois’ previous stance on prediction markets. For instead of keeping up the battle, by defining these as “exchange wagers”, they are effectively recognizing the sports bets at prediction markets. Only now, the incentive is to turn it into a source of revenue for the state, extending the per-bet tax to prediction markets.

How This Could Change US Prediction Markets Laws

There is a strong paradox here between the SB 3019 and Illinois’ stance on prediction markets, and one that the lawmakers will have to address in the coming weeks. At a technical level, they don’t recognize prediction markets and still dispute their legality. Yet they are happy to legally define the wagers and assign it the per-bet tax imposed on sportsbooks. Yet that very legislation, applying to sportsbooks, may be appealed and ended in the next few weeks. Perhaps months, given that the bill has not yet moved anywhere since it was first read out in February.

But it opens an interesting discussion on the future of prediction markets. If the legal battles between the state and federal government ultimately end with the CFTC winning, then the states may look into ways to tax or profit from the prediction market handles. After all, these are massive institutions that generate huge financial revenue, and right now, states do not receive a dime of it.

Per-Bet: From Sportsbooks to Prediction Markets

There is a slight chance that the taxation will stick on prediction markets, and that Illinois will repeal the sportsbook per-bet tax. Effectively, restoring the appeal in sports betting and slapping prediction market bettors with the frustrating tax. The sportsbooks, up until now, worked around the per-bet tax by either passing it onto the customer, or introducing higher minimum betting limits, or doing both. Back in April, FanDuel announced it would waive the surcharge on bets for users, which was $0.50, but it did not state how long this waiver would last for.

The point being, that prediction markets will be put in an awkward spot with such a tax. Their business models have a form of commission, deposit fees, and additional traders’ fees for anyone who doesn’t buy at the market price but sets their own order. At Kalshi, typically contract fees can range from 0.07% up to 7%, and is something a lot of customers complain about. If they were forced to crank those up, or add fixed fees for buying contracts, it can hurt their competitiveness.

Historic Precedent for State Authorities

That wouldn’t just apply to Kalshi alone either. Prediction markets in general would have to work around a potential per-wager tax scheme in Illinois, and the most likely party to pay off that cost would be the customer.

If this tax stands, then it sets a pretty intriguing precedent for other states. It could be a way to hit prediction market popularity, something that is proving difficult to shake among US customers. Even though there have been countless news of insider trading surrounding these platforms, they continue to enjoy massive popularity in the US. A per bet tax might just be a key to shake that, and give state authorities a little momentum in their plight against these federally run platforms.