CFTC Targeting New Illinois Prediction Market Tax

• The Commodity Futures Trading Commission has expanded its Illinois lawsuit
• The expanded lawsuit now also challenges new Illinois prediction market tax
• Illinois is the first in the nation to implement an “exchange wager” transaction tax based on sports event contracts

The Commodity Futures Trading Commission has set its sights on the nation’s first prediction market tax.

The Commodity Future Trading Commission (CFTC) recently amended its lawsuit against Illinois regarding prediction markets and the trading of sports event contracts. The amendment now challenges the state’s recently approved tiered tax rate for prediction market operators and sports event contracts traded in the state.

The new sports event tax is slated to go into effect on Wednesday, July 1, but may be delayed due to the newly amended lawsuit.

CFTC Reaffirms Exclusive Authority

It was only a matter of time before the CFTC took notice of the new Illinois state budget. Illinois lawmakers approved the state budget and sent the document to Pritzker earlier this month. The amendment in the CFTC lawsuit requests a preliminary injunction from the courts to keep the new tax rate from going into law.

The 2027 budget includes a new tiered tax rate for “exchange wagers,” which are defined in the budget document as “an agreement, contracts, transaction, or swap that is offered, traded, or executed on a prediction market or exchange tied to a sporting contest or sporting event.”

Prediction market operators will be required to pay a transaction tax equal to 1.75% for each exchange wager. After the first five million exchange wagers conducted by a prediction market operator during a fiscal year, the transaction tax will increase to 3.5%.

The CFTC on June 17 amended its lawsuit against Illinois just one day after Gov. J.B. Pritzker (D) signed the state’s $56 billion 2027 budget into law.

Illinois an Original Legal Battleground

In its original filed lawsuit in Illinois, CFTC counsel claimed the state “misapprehend both the nature of these contracts and the federal regulatory framework.”

“Event contracts, including sports-related event contracts that are listed on DCMs, are covered by the CEA, and the CEA prohibits States from invading the CFTC’s exclusive jurisdiction over event contract transactions offered by and executed on federally regulated DCMs. By prohibiting these DCMs from operating in Illinois without an Illinois license or by conditioning their operation on compliance with Illinois laws and regulations, Defendants directly interfere with Plaintiffs’ authority pursuant to the federal scheme imposed by Congress through the CEA.”

The lawsuit stemmed from the Illinois Gaming Board levying cease-and-desist notices to Kalshi, Crypto.com, and Robinhood in April 2025. The board ordered the prediction market companies to stop offering their sports event prediction contracts to Illinois residents.