Illinois Sports Betting Faces New Pressure as Lawmakers

Illinois’ evolving sports betting tax structure is already altering bettor behavior and operator strategy, even as the state logged a record $1.42 billion wagering handle in September. Now, a growing bloc of state lawmakers is warning that Chicago’s proposed 10.25% city tax on online wagers could push the market past a breaking point.

Thirty members of the Illinois House sent a letter to Chicago’s 50 alderpersons this week urging them to shelve Mayor Brandon Johnson’s plan. Their concern: layering a steep municipal levy atop the state’s new tiered tax rates and per-wager fees will raise the effective cost of betting enough to drive customers to unregulated offshore platforms.

 

• New State Taxes Are Reshaping Behavior: Illinois’ tiered and per-wager taxes led to 15% fewer bets in September, though the average wager size rose 28%, producing a record $1.42 billion handle.

• Lawmakers Warn Against Additional Local Taxes: Thirty state representatives caution that Mayor Brandon Johnson’s proposed 10.25% Chicago tax could push bettors to unregulated offshore sites, potentially reducing overall tax revenue.

• Revenue Gains Are Modest Despite Higher Taxes: September saw the state collect $28.7 million in taxes, including $10.6 million from the per-wager fee, but net revenue gains were limited as sportsbook earnings fell from $135 million to $103 million year over year.

 

Lawmakers Warn of Market Flight

Rep. Dan Didech, chair of the House Gaming Committee, said the risk is straightforward. If betting becomes too expensive, gamblers migrate to sites that pay no tax and offer no consumer protections. That shift, he said, would undercut state revenue and weaken Illinois’ ability to fund public projects.

Didech has introduced a bill that would ban local governments from imposing their own sports betting taxes, a direct response to Johnson’s proposal. The pushback comes as Chicago reviews the mayor’s $16.6 billion budget. Johnson projected that the local sports betting tax would generate $26 million in annual revenue. But the City Council’s Finance Committee has already rejected another major revenue component: a corporate tax projected to raise $100 million. Illinois initially taxed sportsbook revenue at a flat 15% when the betting market launched. In 2024, lawmakers replaced that structure with a tiered system ranging from 20% to 40%. This year, they added a per-wager tax: 25 cents on each of the first 20 million bets a sportsbook accepts annually and 50 cents on every bet after that.

Sportsbooks absorbed the new fee for the first full month in September. The effects were immediate.

Bettors placed 30.6 million wagers statewide, about 15% fewer than a year earlier. Yet the average bet size rose 28%. That shift resulted in the state’s highest-ever monthly handle at $1.42 billion, up 9% year over year.

Overall, the state collected $28.7 million in taxes in September, including $10.6 million from the new per-wager fee. Despite the record handle, operator revenue fell sharply—from $135 million last September to $103 million this year—leaving the state with only a modest net tax increase of about $740,000. FanDuel parent company Flutter said the fee had “no impact” on its Illinois operations. CEO Peter Jackson noted that bet counts dropped while average stakes increased, a pattern he said aligns with what other high-tax states have observed.

Illinois is part of a wider wave of states raising sports betting taxes as they search for new revenue or attempt to rein in industry promotions. Maryland increased its rate from 15% to 20% this year, while Louisiana moved from 15% to 21.5%. New Jersey lawmakers scaled back but still approved a hike from 13% to 19.75%. Ohio doubled its tax from 10% to 20% in 2023 and considered another increase this year. Industry analysts expect more states to pursue higher rates during the 2026 legislative sessions, as budget pressures persist.

 

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. That’s a direct loss in tax revenue for the state.

 

A Balancing Act With High Stakes

Illinois’ September numbers illustrate the tension: higher taxes produced a slight revenue gain for the state but also reduced wagering volume and introduced new incentives for bettors and operators to change their behavior.

State lawmakers argue that adding a Chicago-specific tax could accelerate those shifts and steer more bettors toward the offshore market. Chicago officials, meanwhile, must weigh the projected revenue gains against the risk of destabilizing one of the country’s most active sports betting ecosystems. The debate underscores a broader question for states nationwide: how to maximize tax revenue without tipping the legal market into uncompetitiveness—a balance Illinois is already testing in real time.