Illinois Budget Imposes 15% Tax on DFS Operators and New Levies on Prediction Market Sports Betting

Illinois lawmakers passed a $55.9 billion fiscal year 2027 budget early Monday morning that includes significant new taxes on fantasy sports operators and prediction market sports betting platforms, alongside broader revenue measures targeting digital assets and social media companies. The budget, which was approved after lawmakers worked through the night, does not raise the state income or sales tax but introduces a set of targeted levies on industries that have seen rapid revenue growth without contributing proportionally to state tax coffers.

The fantasy sports provision is among the most consequential for the daily fantasy sports industry. Illinois will create a new licensing structure for DFS operators and impose a 15% tax on each business that participates in the market. New taxes on digital asset transactions and fantasy sports combined are expected to generate approximately $65 million in new annual revenue for the state. Democratic Representative Curtis Tarver of Chicago noted that the licensing framework was something the DFS industry itself had requested, suggesting the major operators — including DraftKings, FanDuel, and others — preferred a regulated structure to the ambiguity that has characterized the state’s treatment of the industry.

Prediction Markets Face New Taxes Too

Illinois also moved to tax sports bets placed on prediction market websites — a category that includes platforms like Kalshi and Polymarket promo code, which have expanded aggressively into US markets after the Commodity Futures Trading Commission declined to restrict their sports-adjacent markets. State lawmakers had spent weeks debating both how to regulate and how to tax prediction markets, with the question complicated by a federal lawsuit in which Kalshi has challenged the authority of states like Illinois to regulate its markets under state gambling law.

Despite that ongoing litigation, Illinois included prediction market sports betting taxes in the budget. The final bill creates a revenue stream from platforms that have largely escaped state-level taxation while competing directly with licensed sportsbooks for the same pool of sports bettors. The exact rate structure for prediction market taxation was not immediately specified in available reporting, but the budget is expected to generate meaningful revenue from the category as the platforms continue to grow.

For operators and bettors using Illinois sportsbooks, the practical effect of the budget on daily fantasy and prediction market products will depend on how operators respond to the new tax structure. The 15% DFS operator tax is a significant levy that could result in changes to promotional budgets, contest structures, or the economics of small-slate offerings. Operators may also push for clarity on how the prediction market tax interacts with the CFTC oversight structure they have argued preempts state regulation.

Broader Context

Illinois has one of the most complex gambling markets in the country, with legal sports betting, a large casino industry, a pending legal battle over skill games, and now a formalized tax framework for daily fantasy sports and prediction markets. The state has historically had a difficult relationship with DFS — platforms like DraftKings and FanDuel operated in Illinois under years of regulatory ambiguity before the legislature clarified the legal status of the industry. The new licensing structure represents a more settled regulatory environment, though the 15% tax rate will require operators to factor Illinois compliance costs into their market economics.

The prediction market component is particularly significant given the national trajectory of the Kalshi litigation. Illinois is one of several states that have attempted to assert regulatory authority over platforms like Kalshi, and including a tax on prediction market sports betting in a signed budget strengthens the state’s legal and political position that these platforms are subject to state gambling oversight. How federal courts ultimately resolve the CFTC preemption question will determine whether the Illinois tax is enforceable over the long term.