Illinois Plans a New Tax on Prediction Market Trades and Higher Taxes on Sports Betting Operators

Illinois’ Senate Bill 3019, signed into law last month by Governor JB Pritzker, would add a tax on prediction market transactions and raise taxes on sports betting operators. For PSPs and merchants in high-risk verticals, the useful part is not the politics: it is that Illinois is testing how far a state can squeeze regulated wagering volume before activity starts moving elsewhere.

1. The bill sets a tax on prediction market trades at 1.75% for the first five million trades, then 3.5% on any trades above that threshold. In practical terms, that puts a price tag on transaction flow, which is exactly the sort of thing payment and trading platforms watch closely when a jurisdiction decides to treat volume as a taxable object.
2. Industry pushback is already in motion. The Sports Betting Alliance (SBA), whose members include DraftKings and FanDuel, says higher taxes would discourage bettors from using regulated sportsbooks. Prediction market operators have also challenged the measure: Kalshi and the Commodity Futures Trading Commission (CFTC) have filed a lawsuit against Illinois, and the case is pending before the US District Court for the Northern District of Illinois.
3. That lawsuit matters because the state cannot implement the event wager tax until the case is resolved. The source says that process could take years, which means the legal status of the tax is still a live issue rather than a finished policy shift.
4. Illinois already has a track record here. Since sports betting was legalized in the state in 2020, bettors have wagered more than $59 billion and generated over $1 billion in tax revenue. In May 2025, the Illinois General Assembly amended the Sports Wagering Act to introduce a per-wager tax on online sports bets; the measure became law on June 17, 2025, and took effect a few weeks later.
5. The earlier tax increase brought in more revenue, but it also came with softer activity. According to the Illinois Gaming Board, tax revenue rose sharply after the increase, reaching $393 million in fiscal year 2025, while May 2026 data showed a 21% year-over-year drop in the number of bets placed and a 10.2% year-over-year decline in Illinois’ sports betting handle to $1.1 billion.

For high-risk operators, the takeaway is straightforward: Illinois is using taxes both as a revenue tool and as a control mechanism. When a state starts taxing per trade or per wager, the conversation quickly shifts from “how big is the market?” to “how much friction can the market tolerate before volume thins out.”