Illinois weighs local sports betting taxes as Chicago pushes ahead

Illinois lawmakers are debating whether cities should be allowed to levy their own taxes on sports betting, even as Chicago moves forward with a proposal to do just that. The dispute comes after the state raised sports betting taxes twice in two years and added a new per-wager fee, increasing pressure on an industry already facing one of the highest tax burdens in the country.

A revised Chicago budget filed last week by 27 of the city’s 50 alderpeople includes a 10.25% tax on sportsbook operators within city limits. Mayor Brandon Johnson first proposed the tax this fall as part of an effort to close a $1.2 billion budget deficit. If approved, the city tax would take effect on January 1. The proposed levy would sit on top of Illinois’ existing state tax of 20% to 40% on sportsbook gross gaming revenue, which varies by operator size. Sportsbooks would also continue to pay new per-wager fees and a separate 2% tax in Cook County, where Chicago is located.

The move has triggered pushback in Springfield. Illinois Rep. Dan Didech, chair of the House Gaming Committee, introduced legislation that would prohibit municipalities from imposing local taxes on sports betting. After Johnson’s initial proposal, 30 state representatives signed a letter urging the Chicago City Council to reject any new local sportsbook tax. Illinois lawmakers have raised taxes on sports betting operators in each of the past two legislative sessions. Didech warned that continued increases could backfire by driving bettors away from the regulated market.

“If you increase the tax so it becomes cost prohibitive for gamblers, they will seek out overseas sites that are more dangerous, more predatory, untaxed and unregulated,” Didech told the Chicago Sun-Times. “That’s a direct loss in tax revenue for the state. That impacts our ability to invest in infrastructure.”

Chicago officials argue the city needs new revenue sources. Johnson’s budget estimates the proposed sportsbook tax could generate up to $26 million annually. That figure is modest compared with other proposals the mayor has advanced. Earlier this fall, the City Council Finance Committee rejected a proposed corporate tax increase that Johnson said could have raised about $100 million. The revised budget package includes several other fee and tax increases, including higher charges for inspections, fines for false 911 alarms, and increased alcohol-related fees.

Item	Details
Proposed Chicago Tax	10.25% on sportsbook operators
State Tax Rate	20%–40% on gross gaming revenue
Per-Wager Fee	$0.25–$0.50 per bet
Estimated City Revenue	Up to $26 million annually

 

A steadily rising state tax burden

Illinois legalized sports betting with a 15% flat tax on sportsbook revenue. In 2024, lawmakers replaced that rate with a tiered system ranging from 20% to 40%, depending on operator revenue. The change placed Illinois among the highest-taxed sports betting markets in the United States.

This year, legislators added a per-wager tax as the state searched for additional revenue. Sportsbooks now pay 25 cents on each of their first 20 million bets annually and 50 cents per bet after that threshold. Operators responded by adjusting their business models, including adding per-bet fees for customers and setting minimum wager amounts.

September marked the first full month in which the per-wager fee applied to all bets. During the month, bettors placed 30.6 million wagers, about 5 million fewer than in September 2024. At the same time, the average bet size increased by 28%, and total handle rose 9% year over year to $1.42 billion. State tax collections also increased. Illinois collected $28.7 million in sports betting taxes in September, including $10.6 million from per-wager fees. That represented a year-over-year increase of $740,920.

The data has become central to the debate over whether higher taxes reduce betting activity or simply reshape it. While the number of bets declined, higher wager sizes helped offset the drop in volume. Critics of further tax hikes argue that the longer-term risk is gradual erosion of the regulated market as costs rise for both operators and bettors. Those concerns were echoed last week at the National Council of Legislators from Gaming States winter conference. During a legislator-regulator roundtable, Illinois Rep. Jehan Gordon-Booth cautioned against viewing sports betting as an easy source of new revenue.

Gordon-Booth said states are likely to face growing budget gaps next year, in part due to provisions in the “One Big Beautiful Bill,” the sweeping federal tax and spending package signed earlier this year by President Donald Trump. As pressure on state budgets increases, she said lawmakers may be tempted to raise existing gambling taxes rather than explore new revenue sources. “What you think you’re going to get from raising taxes, you’re not going to get,” Gordon-Booth said. “We want this industry to continue to strike the right balance. This will be a problem in budgets for the foreseeable few years. I don’t want to see us continue to deteriorate the industry.”

 

What you think you’re going to get from raising taxes, you’re not going to get.

 

A broader policy question

The clash over Chicago’s proposal highlights a broader policy question for Illinois: whether sports betting should be taxed solely at the state level or whether cities should be allowed to impose additional levies to address local fiscal needs. Supporters of a local option argue that large cities bear unique costs related to infrastructure and public services and should have more flexibility to raise revenue. Opponents counter that allowing city-level taxes could create a patchwork of rates, complicating compliance and making Illinois less competitive with neighboring states.

For now, the outcome remains uncertain. Chicago’s City Council must still approve the revised budget, while lawmakers in Springfield consider whether to block local sportsbook taxes altogether. What is clear is that, after years of tax increases, Illinois’ approach to sports betting is at a turning point, with policymakers weighing short-term budget relief against the long-term health of a heavily taxed industry.