Illinois Senate Passes Progressive Sports Betting Tax

The Sports Betting Alliance (SBA) called the decision "extremely disappointing" and says it will cause real harm to the industry. A new version

Late Sunday, May 26, Illinois senators approved the fiscal year 2025 budget, which includes a significant increase in the sports betting tax. The change would hit the state's largest operators the hardest, increasing their tax burden nearly threefold.

The Sports Betting Alliance (SBA) expressed extreme disappointment at the decision, calling it "extremely disappointing" and arguing that it will cause real harm to the industry. Sunday's version of the budget passed by the Senate will significantly increase the tax rate for the most successful operators, making Illinois the second most expensive state in which to do business in the sports betting industry.

At the highest level of the scale, operators with the highest adjusted gross income will pay a tax of 40%. By comparison, only New York City has a higher rate at 51%. The basis for the tax is HB 4951, which did not initially include a progressive tax on sports betting. The bill now returns to the House of Representatives for concurrence.

Even the smallest operators will pay more. Since the launch of sports betting in June 2021, operators have paid a tax of 15%. Earlier this year, Gov. J.B. Pritzker proposed raising the rate to 35%, but the Senate version of the budget goes beyond that by introducing a progressive scale.

- 20% on AGR up to $30 million.

- 25% on AGR from $30 to $50 million.

- 30% on AGR from $50 to $100 million.

- 35% on AGR from $100 to $200 million.

- 40% on AGR over $200 million.

For some operators, the new scenario represents savings compared to the original proposals. For example, DraftKings would have paid 20% tax on its retail AGR, which would have been $7 million in fiscal year 2024, and 40% on its digital AGR, which would have been $350 million. Rush Street, with total FY 2024 retail sportsbook revenue of $12 million and online revenue of $81 million, would have paid 20% tax on $12 million and 30% on $81 million.

The SBA, which includes BetMGM, DraftKings, Fanatics Sportsbook and FanDuel, said it has collected 55,000 signatures from Illinois citizens opposing the tax hike. Lobbyist Jeremy Coudon said the proposed tax hikes "counterproductively penalize operators who have invested millions in the local economy and created jobs in the state." He warned that this would lead to worse products and conditions for customers, and would also give an advantage to illegal offshore bookmakers.

Coudon also said sports betting operators may reconsider their investments and participation in the state if the proposal becomes law. DraftKings opened a second Illinois location at Wrigley Field in March, and FanDuel has three sportsbooks at the United Center, Fairmount Park and Par-a-Dice Casino.

Illinois will become the second state with a progressive sports betting tax after Arkansas, which taxes all casino revenue, including sports betting revenue, at a rate of 13% on the first $150 million and 20% on revenue above $150 million.