Illinois Moves to Rein In Prediction Markets with Strict New Bill

Illinois lawmakers are considering a proposal that would give the state significant control over prediction markets. This move could mark one of the most ambitious efforts by a US state to regulate the fast-growing sector. If the bill moves forward, it could lead to challenges from the CFTC and platforms like Kalshi, which contend that prediction contracts are regulated on the federal level

The Bill Proposes Comprehensive Regulations

Senate Bill 4168, introduced on March 5, proposes a new legal framework, known as the Prediction Markets Regulation and Taxation Act. The proposal would give the Illinois Gaming Board the authority to oversee prediction market operators and require companies to obtain a state license before offering contracts to residents.

Operators would be required to pay a $1 million license fee for the right to operate in Illinois. The license would last 12 months, after which companies would need to renew it annually for the same amount. Renewal would require continued compliance with legislative requirements and any additional regulations issued by the Gaming Board.

It is the intent of the General Assembly to regulate qualifying prediction markets separately, impose appropriate consumer protections, and tax such activity at a rate that reflects its economic and revenue potential while ensuring competitiveness.

Senate Bill 4168

However, the proposed legislation draws a clear line around sports. The proposed system would prohibit contracts that involve athletic contests, sporting events, or any of their components. Sports wagering would continue to operate under the current state betting regulations, which were established when Illinois legalized sports betting in 2019.

Operators Would Have to Follow Strict Guidelines

The bill envisions prediction markets operating in areas such as political elections,

economic indicators, regulatory decisions, weather phenomena, or entertainment events. Illinois lawmakers aim to move prediction markets outside their regulatory grey area, arguing that companies offering such products to state residents would need local authorization. This stance also challenges assertions by prediction market companies that they can operate nationwide without seeking approval from individual states.

Under the proposed legislation, operators would be required to comply with anti-money laundering rules, introduce minimum age restrictions, and add geolocation systems to prevent access from restricted jurisdictions. The proposal would also impose a 50% privilege tax on adjusted gross receipts generated from contracts involving users in Illinois. Operators would submit monthly payments to the Gaming Board.

Enforcement is just as direct. Operating a prediction market without a license or offering sports-related contracts would constitute illegal gambling under Illinois law and lead to harsh penalties. The approach echoes steps taken in other states such as Massachusetts, which moved to block sports-related contracts without a local license. Meanwhile, jurisdictions like New York are considering legislation to restrict prediction markets.