Illinois Lawmaker Files a Bill to Repeal the State's Prediction Market Tax

HB 5811 would strike the exchange wager tax Illinois enacted in its budget less than three months ago, along with the definition that brought prediction markets inside the Sports Wagering Act. The tax is already being challenged in court by Kalshi and the Commodity Futures Trading Commission, and the bill would not end that fight.

• Representative Travis Weaver filed HB 5811 on Wednesday, according to Gambling Insider's report of the bill record
• The bill would repeal the exchange wager transaction tax of 1.75% on a platform's first five million exchange wagers in a fiscal year and 3.5% on every wager after that
• It would also remove the Sports Wagering Act's definition of an "exchange wager", the provision that brought prediction-market contracts tied to sporting events within state law
• Illinois enacted the tax and a licensing requirement for prediction markets through SB 3019 in its FY2027 budget; the CFTC amended its April lawsuit to challenge it, and Kalshi sued in June
• The state's sportsbook taxes, a 20% to 40% graduated rate on adjusted receipts and a per-wager charge of $0.25 rising to $0.50, would be untouched

A Repeal Bill Before the Tax Has Collected a Full Quarter

An Illinois lawmaker is seeking to repeal the state's tax on sports prediction markets less than three months after it became law, Gambling Insider reported on Thursday. Representative Travis Weaver filed HB 5811 on Wednesday. The bill would repeal the provisions of the Illinois Sports Wagering Act that create the exchange wager transaction tax and would delete the definition of an exchange wager, which covers any agreement, contract, transaction or swap offered, traded or executed on a prediction market and tied to a sporting contest or event.

The tax was set at 1.75% on the first five million exchange wagers a platform conducts in a fiscal year and 3.5% on each wager after that. Illinois approved it as part of its FY2027 budget package earlier this year, when SB 3019 amended the Sports Wagering Act to define exchange wagers and bring them within the state's sports wagering framework. The same law requires prediction markets to obtain state licences.

The repeal would leave the rest of Illinois's sports betting regime alone. Licensed sportsbooks pay a graduated tax of 20% to 40% of adjusted gross sports wagering receipts and a separate per-wager tax of $0.25 on each of their first 20 million annual wagers and $0.50 above that, a structure iGaming Times covered when the per-wager fee took effect.

The Tax Is Already Before Two Federal Courts

The Commodity Futures Trading Commission sued Illinois in April, before the tax existed, challenging the state's attempt to apply its gambling laws to platforms registered with the federal agency. After Governor JB Pritzker signed the budget, the CFTC amended its complaint to attack the exchange wager tax as well. Kalshi filed its own suit in June, arguing that state regulation of a federally registered exchange is pre-empted by the Commodity Exchange Act and challenging the licensing and geolocation requirements that came with the tax. Coinbase has a separate case against the state dating from December 2025.

HB 5811 would remove the tax if enacted but would not resolve the underlying question of state versus federal authority, which New Jersey has now asked the Supreme Court to take up. Illinois's regulatory profile is on the iGaming Times country page.

A Tax That Cannot Be Collected Is a Tax Worth Repealing, or Worth Keeping as a Marker

Illinois wrote the exchange wager tax knowing the platforms would refuse to pay it and the CFTC would sue, and both happened. The state's choice now is between a statute that asserts jurisdiction and collects nothing while the courts decide, and a repeal that concedes the ground before they do. Weaver's bill is the second option. The Pritzker administration, which has defended the tax in court, is unlikely to see it that way, and a single member's bill in September is a long way from passage.

Illinois Is the Test Case for Taxing the Exchanges Instead of Banning Them

Most states have tried to keep prediction markets out; Illinois tried to tax them in, defining the contracts as wagers and charging accordingly. Kalshi's co-founder said this week that states "are able to tax us" and that nothing stops them, which is a curious position for a company suing Illinois for doing exactly that. The distinction Kalshi draws is between a tax on a registered exchange and a gambling licence imposed on one. HB 5811 would remove both, which may be why it appeals to the industry and worries the state.

The Repeal Would Not Give Illinois Back the Revenue It Gave Away

The exchange wager tax was budgeted revenue in a budget that also raised the sportsbook per-wager fee. Repealing it without replacing it leaves a hole, and the sportsbooks that pay 20% to 40% plus the per-wager charge will note that their untaxed competitors would be the beneficiaries. The American Gaming Association's estimate this week that prediction markets have cost states $1.3 billion in tax since 2025 is the number the bill's opponents will use.

Illinois moved first on taxing prediction markets and may now be the first to think again. Whether HB 5811 goes anywhere, it shows how quickly a state's certainty about the exchanges can fade.