And another thing …
The Commodity Futures Trading Commission (CFTC) amended its prediction market-related lawsuit against Illinois this week to include the state's incoming transaction tax for federally regulated exchanges.
- The CFTC updated its lawsuit against Illinois to challenge a new state transaction tax on prediction market exchanges, arguing it infringes on federal authority.
- The tax would charge 1.75% on the first 5 million trades and 3.5% after that, which the CFTC says could effectively act as a ban on federally regulated markets.
- The agency is seeking an injunction to block enforcement while Illinois continues efforts to restrict prediction markets through broader regulatory actions.
As the CFTC sees it, that tax is just more proof of Illinois trying to encroach on the federal agency’s exclusive oversight of prediction markets (also known as designated contract markets, or DCMs).
“Defendants’ attempt to regulate CFTC-regulated DCMs and target these DCMs by singling them out for special fees interferes with Plaintiffs’ exclusive authority to uniformly regulate and monitor this congressionally defined market,” the amended lawsuit states.
The updated lawsuit was filed on the same day that Illinois Governor JB Pritzker signed budget legislation into law, including a new tax on prediction markets. The transaction fees, which take effect July 1, will cost an operator 1.75% on each of their first 5 million trades, then 3.5% thereafter.
CFTC amends lawsuit vs. Illinois to challenge new state law requiring prediction markets to pay a transaction fee to Illinois ranging from 1.75% to 3.5% of the value of each sports-event contract, and files a motion for preliminary injunction to block implementation of new law. pic.twitter.com/8CrjiqqgNg
— Daniel Wallach (@WALLACHLEGAL) June 18, 2026
This, the CFTC notes, would be “in addition to the taxes the State levies on gambling entities, like sportsbooks.”
“Depending on how these fees are calculated, they likely meet or exceed the per-transaction fees the DCMs charge traders - especially at the 3.5% level - effectively operating as an outright ban,” the lawsuit claims.
At any rate, the CFTC argues the tax and state’s sports betting laws are preempted by the federal Commodity Exchange Act.
Illinois has not yet filed a reply to the lawsuit’s latest claims, but the state is trying to bring prediction markets to heel. That began with Illinois sports betting regulators sending cease-and-desist letters to operators in April, arguing their sports-related event contracts amount to illegal sports wagering.
“No person or entity may engage in a sports wagering operation or activity in Illinois unless licensed by the (Illinois Gaming Board),” the regulator warned.
Don't tread on we
Whether the court agrees with the IGB remains to be seen. That is also true in many other states, as a growing number of lawsuits involving the CFTC, state gambling regulators, and prediction markets are being filed and fought over across the U.S.
In Illinois, though, the CFTC says the recently passed transaction tax has “ratcheted up the pressure” on prediction markets. The agency now wants both a preliminary and permanent injunction to stop Illinois.
“Unless restrained and enjoined by the Court, Defendants are likely to continue their attempts to subvert federal law and the exclusive jurisdiction to regulate event contract swaps conferred on the CFTC by Congress,” the lawsuit says. “Plaintiffs request that this Court enjoin the enforcement of these laws as applied to commodity derivatives markets and swaps traded on (prediction markets).”
