Illinois Sports Betting Taxes Go Up

Online sportsbooks in Illinois are facing bigger taxes after Illinois Governor’s J.B. Pritzker’s most recent budget was approved. Online sports betting companies have threatened to sever ties with Illinois, threatening to scale back operations or maybe close down completely. It is expected that a 40% net revenue tax will be applied to FanDuel and DraftKings as part of the spending plan approved by the Illinois General Assembly last week. This is an increase from the 15% fixed charge that bookmakers had to pay since 2020. The two largest mobile betting companies claim that the increase is sufficient to force them to “reevaluate their level of investment and participation in the state.” Last year, they took in over $729 million from Illinois bettors, and so far this year, they have won by almost a quarter of a billion dollars.

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According to Pritzker’s office, it’s about online sportsbooks paying “their fair share.” In the last days of the busy spring legislative session in Springfield, a bevy of lobbyists from DraftKings, FanDuel, and other significant bookmakers united under the banner of the Sports Betting Alliance and made the tax raise a challenging request for legislators. One of the primary causes of contention during the protracted budget deliberations within the Democratic supermajorities in the Capitol turned out to be the governor’s planned 35% flat tax increase.

The idea was opposed by Republican lawmakers, and several Democrats expressed concern that they would be penalizing an industry that generated over $1 billion in sales and $150 million in state tax income in the previous year.

State Representative Curtis Tarver, a Democrat from Chicago, stated, “That’s a tax structure that’s tough for any industry, let alone a nascent one.” Tarver ultimately voted in support of the budget measure, which included a progressive sports betting tax scheme akin to the one Illinois casinos pay.

The tax structure designed by Pritzker’s budget team is tier-based, with sportsbooks paying taxes on 20% of their earnings after winners are paid out up to $30 million, 25% of earnings up to $50 million, 30% of earnings up to $100 million, 35% of earnings up to $200 million, and 40% of any earnings over that amount. Out of the 13 sportsbooks in Illinois, FanDuel and DraftKings were the most affected, having taken in over $100 million in revenue last year.

With approximately $411 million in revenue last year, FanDuel had the largest windfall in the state, paying about $62 million in state taxes. Based on $319 million in sales, DraftKings paid almost $48 million in taxes, according to Illinois Gaming Board documents.

FanDuel would have paid the state approximately $145 million under the tiered system, while DraftKings would have been responsible for $109 million. The price of the publicly traded companies’ stocks fell by roughly 8% and 10%, respectively after lawmakers forwarded Pritzker’s tax rise proposal.

Sports Betting Alliance president Jeremy Kudon said that sportsbooks will have to consider whether to stay in Illinois. He said the new rates “counterproductively penalize sports betting operators who invested millions into the local economy and created jobs in the state.” He said it will give them “no choice but to” reconsider their businesses in Illinois. “This tax hike doesn’t just threaten the legal, regulated sports betting market — it will have devastating effects for operators’ in-state partners, including the most vulnerable downstate casinos, who rely on sports betting revenue to create jobs and invest in communities.”

Pritzker’s office said that the new system will give the state slightly more than the previous 35% tax. “Gov. Pritzker believes corporations should pay their fair share in Illinois. Now, thanks to these adjustments, which put the state in line with similarly sized markets, they will,” a Pritkzer spokesman said to the media.

While Illinois’ rate is high, it is still lower than the 51% tax on their online wager winnings that sportsbooks in New York pay. Other tax rates include 36% in Pennsylvania, 20% in Ohio, 13% in New Jersey and just 7% in Nevada.Check out the latest sports betting odds at Caesars.