Chicago’s New Sports Wagering Tax

Chicago’s $16.6 billion budget, which Mayor Brandon Johnson (D) said he won’t sign nor reject, contains his proposed tax on sports bets placed within city limits. A trade group warns the levy could chase operators out of the city and bettors to illegal bookmakers.

Johnson’s proposal calls for a 10.25% tax on operator revenue generated in the third-largest US city in hopes of raising at least $26 million. If the new levy stands, it’d push operators’ tax obligations on Chicago-generated receipts to 32.25%.

That would compound gaming companies misery in Illinois, which has some of the highest sports wagering taxes in the country. Under a newly signed law that went into effect in July, Illinois applies a levy of 25 cents on an operator’s first 20 million booked bets and 50 cents thereafter. The Sports Betting Alliance (SBA) warns a city-specific tax will drive bettors to black market bookmakers.

The new Chicago tax on sports wagering will drive more sports fans to illegal, predatory websites and bookies that are thriving online without any oversight or consumer protections, while avoiding tax obligations entirely, according to the trade group. Further penalizing players in the City of Chicago pushes more sports fans to unregulated, illegal alternatives and has serious implications for the sustainability of the legal market.

The city’s new budget also features a new $6.8 million levy on video gaming terminals (VGTs).

Chicago Sports Betting Tax Raises Other Concerns

There are concerns that the fresh sports wagering tax raises new licensing concerns that could ultimately lead some gaming companies to halt offering sports betting in Chicago.

Those worries are born out of criticism that Johnson’s tax proposal doesn’t contain adequate regulatory framework and with it scheduled to go into effect on Jan. 1, operators may not have enough time to come into compliance. Then there’s the worry that if the city’s sports betting levy moves to the upside, bettors will be compelled to boost their wage sizes.

The city’s new tax has raised concerns of city leaders and industry experts who argue that raising the cost to bet will have unintended consequences by pushing more consumers to place higher bets or pushing more people to seek out illegal alternative, adds the SBA.

Recent data confirm the aforementioned state tax hike that went effect in July resulted in reduce bet count, but increased revenue for the state, indicating bettors are in fact betting less while increasing the size of their wagers.

Why Chicago Needs Money

A big part of the reason Chicago is cash-strapped is public pension debt — something the upcoming Bally’s casino is also tasked with improving. In fact, Chicago’s $53 billion in unfunded public pension liabilities exceeds the related tallies of 44 states, according to Illinois Policy.

However, the Johnson budget that includes the sports betting and VGT taxes doesn’t include furloughs, higher healthcare premiums, or pay freezes for the city’s public workers. It actually calls for raises.