© MATT DAYHOFF/JOURNAL STAR / USA TODAY NETWORK

• The Illinois budget has been approved by both the House and Senate
• The $53.1 billion FY 2025 budget includes a new progressive sports betting tax rate for operators
• If signed into law by Gov. J.B. Pritzker (D), operators will pay a tax rate of 20% to 40%  based on adjusted gross revenues

The Illinois FY 2025 budget passed out of the House during the wee hours of the morning today, putting a new progressive sports betting tax rate one-step away from becoming a reality for licensed sports betting operators.

The Illinois House concurred with changes made by the Senate to HB 4951, the state’s $53.1 billion FY 2025 budget, approving the document by a 60-47 vote.

The state budget includes the first-ever progressive tax rate for sports betting operators in the country, which will see sportsbooks pay a rate of 20% to 40% based on adjusted gross revenues.

First True Progressive Tax Rate in U.S.

Coming into the budget season, sportsbook operators in Illinois were up in arms after Gov. JB Pritzker (D) suggested increasing the state’s sports betting tax rate from 15% to 35% in his budget proposal. Now, however, operators may have to pay up to a maximum 40% rate based on their adjusted gross revenues.

The change came over the Memorial Day weekend holiday, as the Senate approved its own version of the FY 2025 budget that included the progressive sports betting tax rate scale. Based on the new structure, 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 signed into law by Gov. Pritzker, the new tax rate will go into effect on July 1.

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.

Sign of What’s to Come for Sports Betting?

If approved, Illinois will be the first state to increase its sports betting tax rate since Ohio successfully increased its rate from 10% to 20% just a mere seven months launching sports betting on Jan. 1,  2023.

It could be a harbinger of what’s to come in the future for sports betting legislation, as more states may choose to reexamine their current laws instead of approving new gaming opportunities to increase revenues.

New Jersey, one of the most robust sports betting markets in the country, is currently doing just that. Sen. John F. McKeon (D-27) introduced S3064 in April, which aims to increase both the state’s sports betting and iGaming tax rates to 30% of gross gaming revenue. The state’s sports betting tax rate is currently at 13% and its iGaming rate is 15%.

If approved, New Jersey would be among the highest taxed states in the country for sports betting and iGaming.

In 2023, New Jersey brought in $125.57 million in online sports betting tax revenue at a 13% tax rate. If the rate had been 30%, the state would have taken in $289.8 million in tax revenue for the year. For iGaming, the Garden State reported $288.48 million in tax revenues at a 15% rate. At a 30% rate, New Jersey would have taken in nearly $577 million in iGaming revenues for the year.

Massachusetts Sen. John F. Keenan (D – Norfolk/Plymouth) also recently proposed an amendment to the Senate’s FY 2025 Massachusetts budget that will increase the state’s online sports betting tax rate from 20% to 51%, a 155% increase.

Keenan’s amendment was roundly rejected by the Senate, however, last week.

Operators Not Happy

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.

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.

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