Illinois Legislator Files Bill to Repeal Prediction Market Tax as Legal Challenges Intensify

A Republican legislator in Illinois has introduced a bill to repeal the new tax on sports prediction markets before it generates any revenue. Republican Rep. Travis Weaver filed House Bill 5811 this month. The measure would eliminate the 1.75 percent per-wager tax on exchange wagers that doubles to 3.5 percent after the first 5 million wagers in a fiscal year, along with the accompanying statutory definition of such wagers.

The tax formed part of the state budget signed by Gov. JB Pritzker on June 16. Weaver introduced the repeal legislation during a period when the Illinois legislature is in recess ahead of a veto session in late November and early December. He argued this window offers the best opportunity to strike the tax while its legality remains unresolved in court.

Weaver told SBC Americas that Democratic leaders added the tax and four others without including projected revenue in the budget. Instead, the budget allocated funds for the attorney general to defend the measures. “Typically, you would include a tax in a budget because you think it will raise money, but they actually didn’t include any revenue in the budget for many of these taxes,” Weaver said. “Instead, they included money in the budget for the attorney general to defend them because they’re not even sure if these taxes are legal.”

He further contended that many of these taxes, including the one on prediction markets, implicate federal interstate commerce and should be addressed at the federal level. Weaver also criticized the cumulative tax burden on Illinois gamblers, pointing to two recent sports wagering tax changes. Effective July 1, 2024, the state replaced a flat 15 percent tax with a sliding scale from 20 percent to 40 percent. From July 1, 2025, sportsbooks faced a per-wager tax of 25 cents per bet, rising to 50 cents after the first 20 million wagers. Those changes prompted customer surcharges and minimum bet adjustments across all ten licensed sportsbooks.

Legal Challenges from Operators and Regulators

Weaver’s bill arrives as the prediction markets industry and the Commodity Futures Trading Commission (CFTC) challenge Illinois on multiple fronts. Kalshi sued the state over both the tax and proposed licensing requirements, asserting that event contract regulation falls exclusively under CFTC authority. The CFTC sued Illinois, Arizona and Connecticut in April, later amending its complaint to target the new prediction market tax directly.

Illinois is one of three states to approve taxation of sports event contracts this year. Kentucky enacted a broader law covering taxation, licensing and regulation, drawing suits from designated contract markets and the CFTC. North Carolina passed a tax effective Jan. 1, 2027, without licensing requirements and has faced no court challenge to date.

Limits of State Taxation on Federally Regulated Activity

Josh Kirchner, a partner and gaming attorney at Holland and Knight LLP, previously told SBC Americas that states can tax certain federal activity but risk crossing into impermissible regulation. The question is how far a tax can extend before it functions as a stand-in for rules that preempt federal law. Illinois’ approach, like Kentucky’s, exceeds pure taxation according to this analysis, while North Carolina’s narrower statute presents a closer call.

The repeal bill addresses only the tax and does not touch the state’s separate licensing and regulatory plans for prediction markets. Outcomes in these cases will determine how readily operators can engage with sports event contracts in jurisdictions attempting to layer state requirements atop CFTC oversight.

Reporting: SBC Americas

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