Illinois Senate approves progressive sports betting tax hike to 40%

Lea Hogg May 28, 2024

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Illinois Senate approves progressive sports betting tax hike to 40%

On 26 May, the Illinois Senate voted to approve a progressive tax increase on sports betting revenue, which could see rates climb to a maximum of 40 percent. This measure, part of the state’s fiscal year 2025 (FY2025) budget, will make Illinois’ sports betting tax the second highest in the nation, following New York’s 51 percent. The budget now returns to the House for a final vote in two weeks, following the legislature’s summer recess.

Governor J.B. Pritzker initially proposed a 35 percent top rate in February, but the revised plan outlines a more aggressive tax structure. Under the new plan, operators will face a tiered tax system: 20 percent on revenues up to $30 million, 25 percent for revenues between $30 million and $50 million, 30 percent for revenues between $50 million and $100 million, 35 percent for revenues between $100 million and $200 million, and a maximum of 40 percent for revenues exceeding $200 million. This represents a significant increase from the current 15 percent flat rate applied statewide.

Controversial decision with far-reaching implications

All active operators in Illinois will see their tax rates increase if the proposal becomes law, with only DraftKings and FanDuel likely to hit the highest rate tier. Smaller operators, such as Rush Street Interactive, will experience a smaller rate increase in comparison to their larger counterparts.

The proposal has faced considerable opposition from sports betting operators, who argue that the tax hike will negatively impact their business and the broader market. The Sports Betting Alliance (SBA), representing major operators like FanDuel, DraftKings, BetMGM, and Fanatics, has been vocal in its criticism. SBA President Jeremy Kudon warned that the higher taxes would lead to “worse products, worse promotions, and inevitably, worse odds for Illinois customers.” He emphasized that the increased tax burden could benefit illegal offshore sportsbooks, which do not adhere to Illinois’ regulations or pay taxes.

Kudon also highlighted the potential adverse effects on in-state partners, particularly downstate casinos, which rely heavily on sports betting revenue for job creation and community investment. He indicated that sportsbooks might reconsider their investment levels and participation in Illinois if the tax hike is enacted.

In response to the proposed tax increase, the SBA launched a campaign to mobilize customers against the measure, resulting in 53,000 emails being sent to the Illinois legislature and governor. The lobbying group aims to illustrate the widespread concern among sports betting customers and stakeholders regarding the potential economic fallout from the tax increase.

As the Illinois House prepares to vote on the budget, the outcome remains uncertain. Lawmakers will need to balance the state’s fiscal needs with the potential economic impact on the sports betting industry and its associated businesses. The decision will be closely watched by stakeholders within and beyond Illinois, given its potential to influence sports betting tax policies nationwide.