Gov. JB Pritzker got his wish Wednesday morning in a budget bill more than doubling the Illinois sports betting tax passing the legislature.
The Illinois House passed HB 4951, the state’s $53.1 billion budget, on its third try just before 5 am CT, sending it to Pritzker. The bill includes $1.1 billion in new revenues, including a tiered Illinois sports betting tax hike that raises rates based on total revenue collected.
With Pritzker expected to sign the bill that includes the increase he proposed in February, eyes are now on how sportsbooks and other markets will adjust to the move. Following the Senate’s passage of the budget, DraftKings and FanDuel saw their stock prices trend downward.
Pritzker’s Illinois sports betting wish
In February, Pritzker unveiled his initial $51.3 billion budget, which included raising taxes on businesses and sports betting revenue. His proposal took the sports betting rate from 15% to 35%.
Ultimately, the legislature passed a tiered sports betting tax rate starting at 20% and going up to 40%. The legislation taxes online and in-person sports betting revenue separately.
The tiers are:
- First $30 million in adjusted revenue taxed at 20%
- Revenue between $30-$50 million: 25%
- Revenue between $50 million and $100 million: 30%
- Revenue $100 million to $200 million: 35%
- Revenue above $200 million: 40%
How IL sports betting increases hits sportsbooks
Based on 2023 data, DraftKings and FanDuel would reach the highest two tiers. If the tax were in place last year, FanDuel would have paid 136% more in taxes, from $61.3 million to $144.4 million, while DraftKings would have paid 126% more, from $46.8 million to $105.7 million.
Four other operators would reach the 30% tier.
As the tax increase discussions heated up, the industry came out against the proposed hike. The Sports Betting Alliance, which represents BetMGM, DraftKings, FanDuel and Fanatics, urged customers to contact legislators.
DraftKings and FanDuel reportedly threatened to pull out of Illinois. SBA President Jeremy Kudon said the increase will result in worse products, promotions and odds for Illinois bettors. The fiscal year starts July 1.
Market reacts to Illinois
The Illinois Senate approved the tax change Sunday, which led to significant stock price drops once the market reopened Tuesday following Memorial Day.
FanDuel (FLUT) ended Monday down 7.7% to $188.33 on about 1.5 times its average volume. It was down another 1.6% at noon Eastern Wednesday.
DraftKings (DKNG), meanwhile, tumbled 10.3% to $36.61 on more than four times its average volume. The stock was down around another 1% at midday Wednesday.
The 42.1 million in volume for DKNG was the most since 48.2 million on Nov. 3, the day of its Q3 earnings report.
More tax hikes to come?
Kudon said there is industry concern more states will increase their taxes. With Pritzker’s signature, the 40% rate will be the second-highest sports betting tax in the US, behind New York’s 51%.
Illinois is also the second hike in the past year, as Gov. Mike DeWine doubled Ohio’s sports betting tax from 10% to 20% last summer. This legislative session, New Jersey legislators introduced a bill to increase mobile sports betting tax from 14.25% to 30%.
Not all markets are quick to the tax jump, as Massachusetts Senators recently rejected an amendment to the state budget to raise online sports betting tax from 20% to 51%.
LSR analyst Eric Ramsey and assistant managing editor Matthew Waters contributed to this report.
