The lobbying group for DraftKings, FanDuel and other sports betting companies is suing the city of Chicago over its budget set to go into effect on Thursday.
The budget includes language that would require sports betting operators to be licensed in Chicago. Despite assurances that those licenses would be issued by Dec. 29, that has not happened, which puts the Sports Betting Alliance‘s members at risk of shutting down on Thursday.
The SBA filed its lawsuit in the Circuit Court of Cook County. The group, which also includes bet365, BetMGM and Fanatics, is requesting a temporary restraining order that would prevent the city from enforcing its licensing requirements.
Without the temporary restraining order the SBA has said its five member may need to stop their sports betting operations in the city.
Chicago sports betting details
The SBA was against a previous budget proposal from Mayor Brandon Johnson that included a 10.25% tax on all online sports bets placed within the city’s limits.
An alternate budget was passed, which kept the tax and inserted language the local licensing language.
“The City’s attempt to impose this licensing requirement is invalid. It is unsupported by the ordinance’s text, represents an unconstitutional assertion of authority that rests exclusively with the State, and would irreparably harm the SBA, its members, and the public interest,” reads the motion for a temporary restraining order.
The document further asserts that Chicago lacks home-rule authority to impose such licensing requirements against sports betting operators.
“The Illinois Constitution reserves for the State exclusive authority over revenue-generating licensing and income-based taxation, unless expressly delegated. The Illinois General Assembly has never authorized the City to impose such licensing or taxes on online sportsbooks. Thus, the State has sole authority to license and tax online sports wagering in the State of Illinois.”
Concern for licenses elsewhere
Sportsbooks that operate without all required licenses could risk their licenses in other states and jurisdictions. It is just one area of irreparable injury that could befall the SBA members without a TRO:
“Absent an injunction, the SBA members will be irreparably harmed, as will the public interest. Specifically, SBA members will be forced to choose between operating in Chicago without a City license, which, according to the City, would be unlawful, or shutting down all online sports wagering in Chicago. Either result would irreparably harm their businesses. An alleged violation of one jurisdiction’s laws could put SBA members’ compliance with requirements in the numerous states where the members have gaming licenses at risk.”
SBA members shutting down would also put the public at risk, the TRO alleges. Those five operators accounted for 87.9% of handle and 89.4% of revenue in October‘s Illinois sports betting report.
“This result would also harm the public interest. Chicago bettors who lack legal means to place online sports wagers will be driven to illegal sports wagering alternatives readily available on the internet and through local bookies, which lack State oversight and consumer protections. Those alternatives are untaxed, therefore depriving Illinois and, derivatively, Chicago of significant revenues under existing State tax laws.”
New bill against Chicago sports betting tax
A second bill that will push back on the local taxation attempt is coming.
Sen. Patrick Joyce‘s bill would add a new section to Illinois’ State Revenue Sharing Act:
“Notwithstanding any other provision of law, if a municipality imposes fees, surcharges, or other costs for the privilege of conducting or participating in sports wagering, then the total amount of those fees, surcharges, or other costs shall be deducted from that municipality’s allocation under this subsection and redistributed to the other municipalities and counties in this State in accordance with the allocation formula set forth in this subsection (a).”
Joyce’s bill follows HB 4171 written by multiple state representatives that would make it clear only the state can tax sports betting and not local municipalities.
