Illinois Enacts First-Ever Fantasy Sports Regulatory Framework

Illinois has enacted legislation establishing a comprehensive regulatory framework for daily fantasy sports (DFS) for the first time in the state's history. The provisions were included in the fiscal year 2027 state's omnibus budget bill, Senate Bill (SB) 3019, which passed the Illinois General Assembly and has been sent to Gov. JB Pritzker. The governor has publicly confirmed he will sign the bill. Upon signature, the fantasy sports provisions will take effect on July 1, 2026.

This development is significant for any operator offering DFS contests in Illinois. SB 3019 covers everything from the definition of "fantasy sports" to licensing, taxation, third-party certification, responsible gaming obligations and the minimum age for participation. Operators should begin assessing their compliance posture immediately.

Key Provisions

Definition of Fantasy Sports: The legislation provides Illinois' first statutory definition of "fantasy sports," limiting it to contests between two or more players. Single-player DFS formats are thereby excluded from the state going forward. "Pick 'em"-style contests are expressly permitted under the definition.

Regulatory Authority: The Illinois Gaming Board (IGB) is directed to promulgate rules governing DFS licensure and ongoing regulation. SB 3019 grants the IGB authority to issue rules on an emergency basis, suggesting the rulemaking process will move expeditiously, although no firm timeline has been established.

Taxation: DFS operators will be subject to an annual privilege tax of 15 percent of Adjusted Gross Gaming Revenue generated from Illinois users.

Two-Tiered Licensing Structure: The legislation creates a two-tiered licensing regime based on prior-year user counts.

• Small Operators (up to 7,500 Illinois users in the prior calendar year) – $500 initial two-year license and $300 renewal
• Large Operators (more than 7,500 Illinois users in the prior calendar year) – $7,500 initial two-year license and $5,000 renewal

Transition Period for Existing Operators: Operators currently active in Illinois prior to the July 1, 2026, effective date may continue operating for 90 days following the effective date of IGB rules promulgated under SB 3019, provided they submit a license application with the IGB during that 90-day window. The legislation further creates a temporary license that permits such operators to maintain Illinois operations while their application is pending IGB review.

Third-Party Certification: All DFS operators must obtain certification from an approved independent testing laboratory and renew that certification on an annual basis, even in off-license cycle years.

Regulatory Safeguards: The IGB is directed to establish rules addressing geolocation, know-your-customer (KYC) procedures, anti-money laundering (AML) controls, responsible gaming, underage play prevention, and fraud and illegal activity detection. DFS operators are affirmatively required to have relevant safeguards and controls in place.

Minimum Age: The minimum age to participate in DFS contests in Illinois is set at 21 years.

Safe Harbor for Prior Single-Players DFS Operations: SB 3019 provides a safe harbor for operators that previously offered single-player DFS contests in Illinois prior to the effective date of the legislation.

Exclusion from Criminal Gambling Definition: Licensed fantasy sports activity is expressly excluded from Illinois' criminal definition of "gambling," providing important legal clarity for compliant operators.

Gambling Loss Recovery Act: Losses arising from licensed DFS activity are expressly excluded from recovery under Illinois's Gambling Loss Recovery Act. Additionally, losses incurred from participation in now-prohibited single-player DFS contests that occurred prior to the bill's effective date are likewise excluded from recovery under that statute. This represents a sea change from current application of the Illinois Gambling Loss Recovery Act, which has been used by plaintiffs to seek recovery of losses incurred by DFS contest participants.

What Happens Next: Action Items for Operators

The governor's anticipated signature will trigger a July 1, 2026, effective date.

Operators currently active in Illinois should prepare to promptly file license applications with the IGB once the board issues its emergency rules – the 90-day window to maintain operations runs from the date those rules take effect, not from July 1. Operators should also begin evaluating third-party certification readiness, internal AML/KYC controls, geolocation capabilities and responsible gaming programs in anticipation of forthcoming IGB requirements.

Holland & Knight Can Help

Holland & Knight is closely monitoring the IGB rulemaking process and will provide further guidance as emergency rules are proposed and finalized. Given the IGB's authority to act on an emergency basis, operators should anticipate a compressed timeline and position themselves to respond quickly.

Please contact the authors or another member of Holland & Knight's Gaming Practice with any questions regarding how this legislation may affect your operations in Illinois or in other jurisdictions where similar legislative developments are underway.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.