Illinois lawmakers finalized a new sports betting tax based on the number wagers placed.
Legislators voted Saturday to finalize a $55 billion balanced budget and send it to Gov. JB Pritzker. The budget includes $800 million in tax increases, including a new Illinois sports betting tax that charges sportsbooks per wager.
The Sports Betting Alliance released a lengthy statement about tax. It includes a note that it “will fight this discriminatory tax alongside our customers.” Alliance members include DraftKings and FanDuel, the two operators that will feel the biggest impact from this new tax.
“For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market,” the SBA statement reads.
Illinois sports betting tax hike
Last year, Illinois changed its sports betting tax structure, moving it from 15% to a tiered system ranging from 20% to 40%. The change this year adds a 25-cent per bet tax to sportsbooks for the first 20 million wagers.
That bumps up to 50 cents per wager after the first 20 million. Only DraftKings and FanDuel had more than that figure. There were 370 million bets in Illinois last year, with the two market leaders taking more than 150 million each.
Lawmakers also increased taxes on other industries, like tobacco, which went to 45% from 36% and now includes vape products and nicotine pouches.
New Illinois sports betting tax math
Last year, Illinois sportsbooks paid $276 million in taxes. The new policy would have added $159 million to last year’s total, according to LSR analysis.
That includes FanDuel contributing $74 million and DraftKings paying $67.9 million.
The tiered system generated $315 million in taxes in the first nine months. Both DraftKings and FanDuel entered the 40% tier by January.
More from the SBA
The SBA’s lengthy response also noted that it is disappointing that the legislature opted for the per-bet tax rather than legalizing online casinos.
A proposal to legalize online casinos in Illinois this year estimated taxes of up to $800 million annually.
The SBA also said the tax will push bettors back to the illegal market.
“Make no mistake, this discriminatory, punitive and constitutionally suspect tax increase on legal sportsbooks who have invested more than a billion dollars in the state will be destabilizing for regulated sports betting in Illinois,” the statement said. “A per bet tax most penalizes small recreational bettors — many of whom are betting a single dollar or two. Under this legislation, these popular bets will get hit with a massive 25% or 50% tax.
“Customers understand that they will be the ones to bear the cost of this new tax. That’s why Illinois customers sent more [than] 76,000 emails and tweets to their representatives asking them to stop this discriminatory tax. With this change, lawmakers are essentially urging customers – and especially these small dollar bettors – to switch to unsafe and unregulated sportsbooks who defy state consumer protections and generate zero taxes for state priorities. These illegal operators are the big winners from Saturday’s vote.”
Tax push against sportsbooks
Lawmakers across the nation are looking for ways to increase tax revenue. Sports betting has been a target in multiple states.
Recently, Gov. Wes Moore signed the Maryland budget, which included a 5 percentage point increase to the sports betting tax.
While a new Ohio sports betting tax increase did not survive the budget process, a lawmaker introduced a 2% handle tax on top of the existing 20% tax on revenue.
