DraftKings, FanDuel and three other sportsbooks could shut down online sports betting in Chicago on Jan. 1 if the city passes its budget as currently proposed.
Language in the alternative budget, which goes before the full city council for a vote Saturday, amends Chicago’s municipal code to include “an online sports wagering operator” into a section that would require city-level licenses. Currently, there are no city-level licenses for sports betting in Chicago.
The language is part of a larger issue the SBA would like to see taken out of the budget. Both this alternate budget and the original budget proposal from Mayor Brandon Johnson would add a 10.25% tax on adjusted revenue for all bets placed within city limits.
Passing the budget as written would put bet365, BetMGM, DraftKings, Fanatics and FanDuel out of commission within Chicago until the licensing situation is addressed, SBA Chairman Jeremy Kudon said in a letter to Johnson.
Licensing issue spills to other states
Not holding that city-level license required by Chicago could create issues in other states. Gambling regulators throughout the U.S. typically require their licensees to be in good standing in every other jurisdiction they operate.
“Online sports wagering operators are highly regulated entities that cannot lawfully operate without all required licenses,” Kudon said in the letter. “Absent published standards and a functioning application and issuance process, operators cannot continue to legally conduct business in the City.”
The issue could be moot if the language is stripped.
Concerns about other states not unusual
Not running afoul of state regulations out of fear of action in other states played out in the Tennessee sports betting market during its first full year of operations in 2021. The state required a minimum 10% annual hold, but could only fine operators $25,000 if they failed to meet that threshold.
While $25,000 is a drop in the bucket for most sportsbooks, they eventually fought to pay more in taxes instead, as triggering fine would be seen as running afoul of state regulations. That could have impacted license applications in new states, the companies argued.
Language on Chicago sports betting licenses
Below are the proposed amendments related to sports betting licenses in the Chicago Municipal Code. Words with a strikethrough would be deleted from the current code while underlined words would be added to the code upon approval.
“It shall be unlawful for any person to conduct sports wagering at a physical location in the City of Chicago, including related mobile sports wagering permitted under the Sports Wagering Act as a result of such person being physically located in the City of Chicago, unless such person: (1) is an owners licensee, organization licensee, sports facility or its designee, an online sports wagering operator, or a management services provider of such person, and (2) holds all necessary licenses under the Sports Wagering Act, and (3) holds valid City licenses including a primary sports license and, if applicable, necessary secondary sports licenses.”
Steps for Chicago sports betting licensing
If the budget passes as is, the effective date should be pushed back at least six months to allow for a proper licensing process, the letter says.
The SBA outlined a four-step agenda in a Monday meeting with members of Johnson’s office and the Commissioner of the Department of Business Affairs and Consumer Protection:
- Outline the licensing categories and definitions for online sports betting operators and their service providers.
- Explain the structure and administration of any “primary” and “secondary” license regime.
- Detail all application requirements, timelines, fees, renewal terms and compliance obligations.
- Tell operators about all enforcement expectations and mechanisms for both during the transition and after.
Of course, the SBA would rather see the proposed tax scrapped in favor of a collaborative process with the city.
“Notwithstanding our request for delayed implementation, the Sports Betting Alliance reiterates our position that the City should not pass the ordinance in its current form,” reads the letter. “Instead, the City should work collaboratively with the gaming industry to pursue more durable and permanent revenue solutions, including potential amendments to state law that would support long-term revenue generation for the City while maintaining regulatory integrity and consumer protections.”
Opponents have been loud
A group of Illinois lawmakers have joined operators in pushing back against the latest proposed sports betting tax hike.
A letter from a group of 29 state legislators asked Chicago’s 50 alderpersons to not to include the tax in the budget. State lawmakers have also filed recent legislation that would make prevent cities from taxing online sports betting operators, clarify that only the state can tax them.
The proposed added tax is comes after two straight legislative sessions that hiked taxes on sportsbooks. First, in 2024, the state scrapped its flat 15% tax for a tiered tax system that goes up to 40% for the largest operators.
The state followed a year later with an additional pre-bet tax on all online wagers. Operators now pay 25 cents per bet on their first 20 million wagers accepted in a year, and 50 cents on every wager after that.
That tax is already impacting the market, as several operators have passed the added fee down to customers or introduced minimum bet limits to combat the cost. That led to total bets falling by 15% in September.
