Published: May 30, 2024

Illinois lawmakers approve betting tax of up to 40%

The Illinois House of Representatives has greenlighted the state’s $53.1 billion fiscal year 2025 budget, which includes a new progressive sports betting tax rate for operators. The measure now awaits the approval of Governor J.B. Pritzker, who is expected to sign it into law.

The budget, which passed the House with a 60-47 vote early Wednesday morning, introduces a groundbreaking progressive tax structure for sports betting. If enacted, the tax rates will range from 20% to 40%, replacing the state’s current 15% flat tax rate on adjusted gross operator sports betting revenue.

This would make Illinois the first state in the U.S. to implement such a tax rate specifically for sports betting. Under the new structure, sports betting operators will be taxed as follows, depending on their adjusted gross sports betting revenue totals:

- $0 to $30 million: 20%
- $30 million to $50 million: 25%
- $50 million to $100 million: 30%
- $100 million to $200 million: 35%
- Over $200 million: 40%

The tax rates apply separately to retail and online sportsbooks. If the bill is signed by Gov. Pritzker, the new rates will take effect on July 1.

Currently, only FanDuel and DraftKings would be subject to the highest tax rate of 40%, as their adjusted gross revenues exceed $200 million. Other operators like BetRivers and Fanatics Sportsbook would see their tax rates increase to 30%, while Caesars, ESPN BET, and BetMGM would face a 25% tax rate.

The proposal has been met with strong opposition from the Sports Betting Alliance, which represents operators including FanDuel, DraftKings, BetMGM, and Fanatics Sportsbook. Jeremy Kudon, President of the group, warned that the increased tax rates would lead to worse products, promotions, and odds for Illinois customers. He also expressed concerns that it could drive customers to unregulated markets.

“This is an extremely disappointing decision that will cause real harm. Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget tonight that would make Illinois sports betting tax the second highest in the country and counterproductively penalizes sports betting operators who invested millions into the local economy and created jobs in the state,” Kudon said.

The passage of HB 4951 involved multiple votes and parliamentary maneuvers. After initial confusion and calls for verification votes, the measure finally passed with a critical vote from Democrat Rep. Larry Walsh ensuring the supermajority needed for passage.

The Senate’s amendments, which included the progressive tax rates and the separation of mobile and retail sportsbook revenue for tax purposes, required House concurrence. The House debated and approved these changes in the early hours, wrapping up the session shortly before dawn.

If signed into law, Illinois will become the first state to increase its sports betting tax rate since Ohio raised its rate from 10% to 20% last year. The move could signal a trend as other states consider similar measures to boost revenue. New Jersey and Massachusetts have also seen proposals to significantly increase their sports betting tax rates.

With Illinois poised to lead the way, the new progressive tax structure could become a model for other states looking to maximize tax revenues from the growing sports betting industry.

© Public Gaming Research Institute. All rights reserved.