Illinois Sports Betting Tax Hike Discriminatory, Say Sportsbooks
Illinois sports betting is poised for a significant tax increase, provoking backlash from leading sportsbooks, which have labeled the plan as “discriminatory, punitive, and constitutionally suspect.”
On Saturday, Illinois lawmakers approved a groundbreaking tax structure: a $0.25 fee per wager for the initial 20 million bets placed by an operator annually, escalating to $0.50 for each bet beyond that threshold. This initiative makes Illinois the first state in the U.S. to impose taxes on both sports betting handle and gross gaming revenue, affecting operator profitability and the competitive landscape.
The state had already increased taxes last year, introducing a progressive rate ranging from 20% to 40% on revenue generated by licensed sportsbooks, a stark rise from the prior flat rate of 15%, which is standard in many states.
Sports Betting Alliance Opposes New Tax Structure
The Sports Betting Alliance (SBA)—a coalition that includes major players like FanDuel, Fanatics, DraftKings, and BetMGM—has publicly denounced the proposed tax increase. An SBA spokesperson commented, “By implementing this change, lawmakers are essentially nudging customers—especially those placing smaller wagers—to shift toward unregulated sportsbooks that evade state consumer protections and contribute no tax revenues for vital state services.”
The SBA emphasizes that a flat $0.25 tax on each bet, irrespective of the bet amount, holds particularly detrimental implications for smaller wagers. This tax could render $1 bets unfeasible for sportsbooks, hindering broader participation in legal betting venues.
Tax Burden Will Be Passed to Consumers
Robert Walker, a former sportsbook executive, remarked to Front Office Sports: “This cost will ultimately fall on consumers. While the tax is levied on operators, basic economic principles dictate that the end users will feel the impact.” He further highlighted that this move undermines the competitive standing of regulated operators precisely when they require every advantage against emerging alternatives.
The tax is expected to impact FanDuel and DraftKings most significantly, given their dominance in the regulated market. Following the announcement, shares of DraftKings plunged by 7%, while Flutter, the parent company of FanDuel, experienced a 2% drop—a less severe impact, potentially due to its diversified international portfolio.
In anticipation of revenue losses due to the new tax, operators may resort to strategies such as increasing minimum stakes, slashing promotional offers, or imposing additional fees on bettors, all of which could potentially divert users to offshore betting platforms. Notably, unregulated sports betting sites in Illinois generated nearly $900 million in revenue last year—only slightly less than the $1.2 billion reported by regulated sportsbooks.
Illinois Aims for $1 Billion in Additional Tax Revenue
This new tax initiative aligns with Illinois’ budget strategy to generate an additional $1 billion to enhance public transport funding. To date, Illinois sports betting has contributed $277.5 million in tax revenue in 2024—an impressive increase from the $150 million reached in 2023 following the implementation of the progressive tax structure.
Since the legalization of sports betting in 2020, residents in the Prairie State have consistently increased their betting activities. The data below illustrates the growth trend in betting handle, operator revenue, and tax contributions:
| Year | Total Handle (USD) | Operator Revenue (USD) | State Tax Revenue (USD) |
|---|---|---|---|
| 2022 | $9.75 billion | $806 million | $122 million |
| 2023 | $11.62 billion | $1.002 billion | $150 million |
| 2024 | $14.01 billion | $1.214 billion | $277.5 million |
Analysts predict that had the new tax been applicable last year, sportsbooks would have incurred an additional $70 million in costs. With Governor J.B. Pritzker expressing his commitment to signing the budget, the per-bet tax structure is poised to be effective in the upcoming month, leaving sportsbooks with limited time to adapt to this taxing new reality.
This situation underscores the evolving landscape of sports betting regulation and taxation in the U.S., presenting both challenges and significant implications for stakeholders across the industry.
Adam Roarty, an experienced writer specializing in the gambling sector, has contributed insights for notable platforms such as Oddschecker, CoinTelegraph, and Gambling Industry News. His focus remains on the dynamic developments in sports betting legislation and consumer trends nationwide.
