Illinois Senate Approves Progressive Sports Betting Tax

The Illinois Senate has approved a new progressive sports betting tax, marking a significant shift from the current flat tax rate. Under the new plan, operators with the highest adjusted gross revenue (AGR) will face a tax rate of up to 40%. This would be the second-highest rate in the United States, following New York’s 51%.

The legislative vehicle for the new tax is House Bill 4951, which initially did not include the progressive tax structure when it was approved by the House. The bill now returns to the House for concurrence.

New Tax Structure

The Senate’s proposal introduces a sliding scale for sports betting taxes:

• 20% on AGR up to $30 million
• 25% on AGR from $30 million to $50 million
• 30% on AGR from $50 million to $100 million
• 35% on AGR from $100 million to $200 million
• 40% on AGR over $200 million

This progressive structure applies separately to retail and digital sportsbooks, meaning operators would pay different rates based on the type of revenue.

Impact on Operators

Since sports betting went live in June 2021, operators have been taxed at a flat rate of 15%. Governor JB Pritzker had proposed an increase to 35% earlier this year, but the Senate’s version goes further, especially for high-revenue operators.

For example, DraftKings would benefit slightly under the new structure. For fiscal year 2024, DraftKings' retail AGR was $7 million, which would be taxed at 20%, while its digital AGR was $350 million, taxed at 40%. Similarly, Rush Street would pay 20% on its $12 million retail AGR and 30% on its $81 million online AGR, instead of a uniform 30% on all revenue.

Opposition from the Sports Betting Alliance

The Sports Betting Alliance (SBA), which includes BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel, has voiced strong opposition to the tax hike. The SBA claims to have mobilized 55,000 Illinois residents to email lawmakers against the increase. Lobbyist Jeremy Kudon criticized the proposal, stating it penalizes operators who have significantly invested in the state’s economy.

“This tax hike means worse products, worse promotions, and inevitably, worse odds for Illinois customers – not to mention providing a massive advantage to illegal offshore sportsbooks,” Kudon said. He also warned that the tax increase might force sportsbooks to reconsider their investment levels in Illinois.

 

“This tax hike means worse products, worse promotions, and inevitably, worse odds for Illinois customers – not to mention providing a massive advantage to illegal offshore sportsbooks.”

 

Future of Sports Betting in Illinois

Should the House concur with the Senate’s amendments, Illinois would become the first major U.S. market to implement a progressive sports betting tax. Arkansas currently has a similar tax structure for all casino revenue, which includes sports betting.

The Illinois House is set to reconvene after the holiday weekend to address the bill. If approved, the new tax rates will represent a significant change in the state’s approach to sports betting taxation, potentially influencing market dynamics and operator strategies.