A surprise Illinois sports betting tax hike could lead to sweeping changes beyond the state’s borders, according to Wall Street firms.
Analysts say the new per-wager levy will force strategic adjustments from market leaders DraftKings and FanDuel that could affect betting behavior, pricing, promotions and lobbying priorities beyond the IL sports betting market, as other states consider similar changes. The move could also accelerate pushes for online casino legislation in budget-strapped states, while opening doors for smaller competitors to gain ground.
The Illinois budget passed late Saturday includes a new tax of 25 cents per wager for the first 20 million bets processed annually, and 50 cents for each bet after that. Only DraftKings and FanDuel exceeded that threshold in the past year, leading analysts to describe the measure as both targeted and potentially precedent-setting.
“We fear other states could look to copy Illinois,” Truist analyst Barry Jonas wrote in a client note over the weekend, pointing to active sports betting tax discussions underway in New Jersey, Louisiana, and North Carolina. “Illinois has essentially copied New York and New Hampshire, and this could embolden more aggressive fiscal policies elsewhere.”
DraftKings, Flutter stocks down on news
Shares for both DraftKings and Flutter, the parent company of FanDuel, fell Monday on the news of the additional tax.
DraftKings closed at $33.73, down 6% on more than double its average daily volume.
Flutter’s drop was not as drastic, though the company is far more diversified outside of the US compared to DraftKings. Flutter closed at $245.75, down 2.8%.
Offsetting IL sports betting tax
Wall Street analysts expect both companies to mitigate some of the financial hit by adjusting how they do business. That could mean fewer promotions, less favorable odds, or new minimum bet thresholds that change the customer experience.
Jonas said that operators typically offset about 50% of new tax burdens through such changes. While unpopular, these tactics could become more common across high-tax states if per-bet levies spread.
Another possibility: a surcharges on winning bets—a controversial strategy DraftKings teased in select states last year before ditching it amid public pressure.
“The surcharge concept could be revisited,” Jonas wrote, suggesting the per-bet tax could make such models more palatable, especially if framed as a response to state-imposed costs.
Budget gaps, iCasino, contagion risk
DraftKings and FanDuel are also likely to shift lobbying efforts in key markets away from promoting online casino legalization and towards pushing back against similar tax structures, Citizens analyst Jordan Bender said in a client note.
Illinois lawmakers bypassed a pending online casino proposal this spring despite projections that iGaming could generate up to $800 million in annual tax revenue—far more than sports betting’s current haul. With limited room left to tax sportsbooks without damaging the market, Jonas wrote, states like Illinois may soon turn their focus to casino legislation out of necessity.
“We still view iGaming as the next move for budget-challenged states,” Bender echoed the sentiment, calling the per-wager tax a “bad headline for the industry” but possibly an accelerant for online casino discussions elsewhere.
Maryland recently finalized a 5-percentage-point hike to its sports betting tax, while Ohio lawmakers floated a proposal to tax betting handle on top of existing revenue taxes.
Analysts say Illinois’ new structure could serve as a model for future attempts, especially in states facing deficits and seeking politically low-risk revenue options.
Targeted impact on IL sports betting market leaders
By volume, no other operators in Illinois come close to the 20 million wager threshold set by the new law. Jonas estimated the added cost at $77 million annually for FanDuel and $68 million for DraftKings—roughly 3.5% to 4% of each company’s projected full-year US EBITDA. That’s on top of last year’s shift from a flat 15% revenue tax to a tiered model reaching 40% for high earners.
Bender wrote that the structure appeared “designed to hurt those two companies more than the mid-scale competitors,” noting that operators like BetMGM, Fanatics and Rush Street Interactive would face sub-$5 million hits that could be offset with modest adjustments.
That disparity, Jonas added, could again create a temporary opening for challengers to gain share, though he noted that Illinois’ 2023 tax hike did not result in any sustained shifts in market share or pricing behavior.
The Sports Betting Alliance, which represents multiple operators including DraftKings and FanDuel, called the tax “crippling” and “discriminatory,” warning it would drive bettors back to unregulated sportsbooks.
