Illinois Sports Betting Tax Changes Take Effect

Earlier this year, Illinois lawmakers enacted one of the most unique tax increases on its state’s sports betting operators.

They levied a 25-cent tax on every wager placed with a regulated operator for the first 20 million bets. Then, the tax doubles for every wager placed beyond that threshold.

The changes were recently implemented and now operators are seeing the effects. The Illinois Gaming Board reports that the number of legal wagers dropped by 5 million in September. However, the total handle (the amount bettors wagered) rose 9% to $1.4 billion.

The September numbers appear to fall in line with warnings from those in the industry. Industry stakeholders said the tax would chase away smaller bettors and leave many heading to offshore, unregulated operators.

“This data is a warning sign for Chicago, Illinois, and other state policymakers that overtaxing legal betting will have profound negative ramifications for the sustainability of the legal market and future tax revenues for state coffers,” Sports Betting Alliance of Illinois spokeswoman Maura Possley told the Chicago Tribune.

Industry Sounds Alarm on State Taxes

Along with the per-wager levy signed into law this year, the state also hiked taxes on operators in 2024. That plan featured a tiered scale that reached up to 30%.

Several companies, including FanDuel and DraftKings, added the fees on to bets while others increased minimum wagers. Those in the industry warned that at some point tax increases could jeopardize profitability and revenue brought into states.

“It is important to recognize that there is an optimal level for gaming tax rates that enables operators to provide the best experience for customers, maximize market growth and maximize revenue for states over time,” Flutter Entertainment (parent company of FanDuel) CEO Peter Jackson said after the tax increases.

“We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers while also punishing those operators who have invested the most to grow the online regulated market in the state.”

However more increases could be in the works. The Tribune reports that Chicago Mayor Brandon Johnson has proposed an additional tax of 10.25% on sports betting revenue.

That may be pre-empted by a bill state legislators are considering that would bar cities and other municipalities from taxing the industry.