May 21, 2024; Chicago, Illinois, USA; Chicago Cubs outfielder Cody Bellinger (24) scores against the Atlanta Braves during the 10th inning at Wrigley Field. Mandatory Credit: Kamil Krzaczynski-USA TODAY Sports

• The Illinois Senate approved a budget that includes a new progressive sports betting tax rate for operators
• The graduating sports betting tax rate tops out at 40% for the highest earning operators
• If approved by the House, the new rates would go into effect on July 1

The Illinois legislature was quite busy over Memorial Day weekend, much to the dismay of the regulated sports betting industry.

The Illinois Senate amended the state budget to include a new progressive sports betting tax rate for licensed operators, which will see operators pay a tax rate based on their online and retail sports betting revenues.

The Senate version of the budget now heads back to the House for approval. Operators have spent the last several months decrying Gov. J.B. Pritzker’s (D) plan to increase the Illinois sports betting tax rate from 15% to 35%, but now face a structure that could see the top-earning operators pay the second-highest tax rate in the entire country.

Big Changes to Illinois’ Sports Betting Tax Structure

The Illinois Senate passed their version of the state budget on Saturday, May 26, much to the chagrin of the state’s licensed sports betting operators. The new budget includes a progressive sports betting tax rate scale which will be based on an operator’s adjusted gross sports betting revenues.

Operators will have to pay taxes based on the following 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%

Operators will also be required to pay separate taxes based on the sliding scale for both retail and online sportsbooks. If passed by the House and signed into law by Gov. Pritzker, the new tax rate would go into effect on July 1.

If approved, Illinois will be the first state in the country to have a progressive sports betting tax rate. Arkansas is the only state with a similar type of system, as it taxes its operators at a 13% rate until they surpass $150 million in total gaming revenue, which then triggers a 20% rate.

Currently, FanDuel and DraftKings would be the only two operators in Illinois to be in that top-tier tax structure and have to pay a 40% rate. FanDuel totaled more than $421.3 million in adjusted gross revenue and DraftKings reported $349.9 million.

BetRivers and Fanatics Sportsbook, totaling $81.1 million  and $51.6 million respectively, would see their rates increase from 15% to 30% under the new plan. Caesars, ESPN BET, and BetMGM would see their rates increase to 25% as well.

An industry source told Sports Betting Dime that no operators in the state are pleased with the new plan.

“Several of the lower market share operators were initially supportive of a so-called progressive tax, in part because they felt like a major tax rate increase was inevitable and in part because they thought this would help them bring FanDuel and DraftKings back to the pack,” they said.

Most of the smaller market share operators believed they would be paying a tax rate around 15%, while FanDuel and DraftKings would have paid in the low 30s, the source said.

Operators Unhappy With New Changes

As expected, licensed sports betting operators in the state were not pleased with the new changes.

Sports Betting Alliance President Jeremy Kudon announced over the weekend on the social media platform X the heightened tax rates will result in worse product, worse promotions, and worse odds for Illinois customers.

“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,” he said.

The decrease in services, Kudon noted, will push customers into unregulated sports betting markets and to do business with operators that pay no taxes to the state.

“Sportsbooks across the industry will have no choice but to reevaluate their level of investment and participation in the state should this become law,” he noted.

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