Sportsbooks Warn Chicago Tax Plan Could Halt Betting January 1

Chicago’s 2026 Budget Sparks Sportsbook Warning

Chicago’s proposed 2026 budget has triggered a warning from major online sportsbooks that they may have to stop accepting wagers inside city limits on January 1, 2026, if the plan takes effect without a workable licensing process. The Sports Betting Alliance told Mayor Brandon Johnson that the budget language creates a new city-level requirement for online operators while leaving no published standards to meet, which the group said would make continued operation risky and potentially unlawful.

City Tax Proposal and Licensing Gap

The conflict centers on two related pieces: an added 10.25% city tax on revenue from wagers placed within Chicago, and language that points to a “City license” structure, even though the city does not currently issue such licenses for online sports wagering. Alliance members include DraftKings, FanDuel, BetMGM, Fanatics Sportsbook, and bet365.

Alliance Letter Highlights Compliance Concerns

The Sports Betting Alliance delivered its concerns to the mayor in a letter and referenced a central problem in direct terms.

“As drafted, the proposed budget and revenue ordinance would impose a City licensing requirement effective January 1, 2026, yet the City does not currently have a licensing rubric that contemplates online sports wagering operators. In the absence of defined terms, application standards, required documentation, and administrative procedures, operators would have no meaningful way to comply with the ordinance upon its effective date,” the SBA letter noted.

The group said the gap between the effective date and the absence of an application and issuance process leaves operators with no clear route to comply. SBA chairman Jeremy Kudon also tied the risk to the underlying regulatory structure of the industry.

“Online sports wagering operators are highly regulated entities that cannot lawfully operate without all required licenses,” Kudon said in the letter. “Absent published standards and a functioning application and issuance process, operators cannot continue to legally conduct business in the City.”

The alliance urged Chicago to delay enforcement for 180 days so the city can develop a licensing framework. It also said it prefers the city remove the new financial measures from the budget and pursue longer-term solutions with industry input.

Projected Revenue and Budget Dynamics

Johnson introduced the sports betting levy in October as part of his proposed $16.6 billion budget. The city projected the tax could bring in $26 million, using a forecast of $253.6 million in operator adjusted gross revenue tied to city-based wagers. According to InGame, that projection represents roughly 40% of the $633.6 million in revenue generated in Cook County during 2024.

The mayor’s broader budget package faced resistance in the City Council’s Finance Committee in mid-November, largely tied to a proposed corporate head tax. Even so, aldermen kept the sports betting tax proposal when they drafted an alternative budget that advanced out of the Finance Committee on Wednesday and could reach a full council vote as early as Saturday, December 20.

The alternative budget also proposes legalizing video gaming terminals in Chicago as a way to help address a $1.2 billion budget gap. Reports describe pushback from Bally’s, which operates a temporary casino in the city while it completes the permanent Bally’s Chicago facility.

Johnson has not said whether he would veto the alternative budget. A veto would require a two-thirds council majority of 34 votes to override. Reporting also noted that if the city fails to enact a budget by the new year, a government shutdown could follow.

Compounded Taxes and Market Impact

If Chicago adds a 10.25% city tax to existing levies, operators would face a minimum 32.25% tax on Chicago-based sports betting revenue. Illinois applies a progressive statewide tax that starts at 20% and reaches 40% at higher revenue thresholds. Operators also pay a 2% tax on revenue generated within Cook County, a levy included in the 2019 legalization law.

In addition, the state enacted a per-wager surcharge that took effect July 1 as part of the Fiscal Year 2026 budget passed in May. The surcharge charges 25 cents per wager until an operator accepts 20 million wagers, then rises to 50 cents after that point. The surcharge generated $20.6 million in state tax revenue in its first three months, and FanDuel and DraftKings have already paid the higher rate after surpassing 20 million accepted wagers.

The tax layering has already influenced how some operators manage costs. In the Illinois market, some have passed fees on to customers or introduced minimum bet limits. Reporting cited a 15% decline in total bets in September.

Regulatory Ripple Effects Beyond Illinois

The Sports Betting Alliance also said the city’s plan could create problems outside Illinois, since regulators in many states expect operators to remain in good standing everywhere they do business. The alliance cited the risk that operating without a required city license in Chicago could trigger scrutiny in other jurisdictions.

The budget language itself sends mixed signals, according to reporting. In one place, it references “valid City licenses including a primary sports license and, if applicable, necessary secondary sports licenses,” with secondary licenses tied to management services providers. Elsewhere in the same section, it states that any online operator with a master state license can conduct online wagering, without mentioning a city license.

Proposed amendments to Chicago’s municipal code would explicitly add “an online sports wagering operator” to a section that requires city-level licensing, even though no city license currently exists for online sports betting. The alliance said the short timeframe between passage and January 1 leaves little room for a licensing setup that typically takes months.

State Lawmakers Move to Counter City Plan

The operators’ warning arrives as state lawmakers also seek to block Chicago’s plan. Illinois State Rep. Daniel Didech introduced legislation in October that would prevent local jurisdictions from taxing, regulating, or imposing fees on gambling. Illinois Politico also reported that State Sen. Patrick Joyce submitted a bill that would reduce Chicago’s share of the Local Government Distributive Fund by an amount equal to whatever the city collects from a sports wagering tax.