Illinois sports betting is already feeling the effects of a new per-wager tax, but perhaps not in the way lawmakers hoped.
Bettors in the state wagered $1.42 billion in September, up 9% year over year to reach a new record for the first month of football season. Ticket count tumbled 15% to 30.6 million, though, with DraftKings and FanDuel enduring the biggest drops.
The two top national brands both instituted a per-bet surcharge in Illinois beginning on Sept. 1 to offset the tax increase that took effect in July.
The tradeoff was an extra $740,920 in taxes paid this September despite the wager tax amounting to $10.6 million this year. Operators generated $103 million in gross revenue in September compared to $135 million last year.
Illinois bettors bear new operator taxes
Illinois’ $55 billion budget for the year includes a novel sports betting tax amounting to $0.25 per wager for the first 20 million tickets, increasing to $0.50 thereafter.
The market leaders have already crossed into that top tier in the three months since the fiscal year began, creating an effective tax rate north of 30% – double the 15% established in the state’s initial sports betting framework in 2019.
That rate will climb toward 50% as the year progresses with the previous tax increase added in 2024, which created a tiered structure based on annual volume and affects DraftKings and FanDuel the most. Faced with escalating burdens, both operators have chosen the most straightforward workaround: pass the costs along to the customer.
The single-digit handle increase for September looks good at a glance, but it does suggest a possible cooling-off against the 16% growth across the first eight months of the year. Handle for the two leaders was up just 3% to create some drag on the statewide totals and trends.
The average ticket size for the month ballooned to $46.44, a 28% increase from last September’s $36.20. Keith Whyte, former executive director of the National Council on Problem Gambling, wrote last month about the negative impacts higher bets.
Ticket tax has minimal impact on operators
DraftKings and FanDuel aren’t the only operators who’ve changed their approach in the state.
All 10 of the state’s sports betting apps now have localized rules for Illinois. Caesars, Fanatics, and bet365 also charge a per-bet fee, while the other five have instead chosen to implement a minimum bet size ranging from $1 to $10.
Flutter CEO Peter Jackson indicated that the new fees had “no impact” on the FanDuel’s Q3 numbers:
“As you’d expect, we’re seeing a reduction in the number of bets (in Illinois) but increasing handle per bet,” Jackson said during Wednesday’s quarterly presentation. “When we look to the September data, Illinois is definitely behaving in line with other states.”
