Illinois budget introduces taxes on crypto, fantasy sports and prediction market betting

Illinois lawmakers approved a $55.9 billion fiscal 2027 budget early on Monday that introduces new taxes on cryptocurrency transactions, fantasy sports operators and prediction market sports betting, while preserving funding for social programs amid concerns over federal spending cuts.

The spending plan, backed by a similar amount of projected revenue, passed after overnight negotiations with support from Democrats, highlighting partisan divisions over spending and tax policy in the Democratic-controlled legislature.

The budget includes more than $800 million in new revenue measures, including taxes on social media companies, digital assets, fantasy sports operators, prediction market sports betting, remote tobacco retailers and digital advertising services. It also freezes corporate net operating loss deductions, a proposal first advanced by Democratic Governor JB Pritzker.

Democrats said the measures would help the state address economic uncertainty and potential reductions in federal support without raising taxes on working families.

"It's allowed us to be prepared for the great reality we face today. The reality of federal cuts. The reality of chaos coming from Washington," Senate Democrats' budget leader Elgie Sims said during debate. "We are not placing blame. We are prepared. We are not acting on fear. We are acting responsibly."

A new tax on social media companies is expected to generate about $200 million annually, while broader tax changes proposed by Pritzker could raise roughly $500 million. Taxes on digital asset transactions and fantasy sports are expected to generate about $65 million.

Illinois will establish a licensing framework for fantasy sports operators and impose a 15% tax on the industry. Democratic Representative Curtis Tarver said the structure was something the industry itself requested.

Republicans criticized both the spending level and the new taxes. "This state is addicted to spending money it doesn't have," Republican Representative Blaine Wilhour said. 

"It's addicted to creating programs that it can't afford. It's addicted to making promises it can't keep, and it's addicted to coming back to the taxpayers constantly, constantly to clean up the mess."

Lawmakers had spent weeks debating whether and how to tax prediction markets. State legislators discussed both regulation and taxation of the platforms, although states’ authority to oversee their operations has been called into question by a federal lawsuit against Illinois and several other jurisdictions.

Lawmakers had also raised concerns about how prediction markets currently operate, citing risks such as insider trading, low minimum age requirements, and the range of events available for trading.