Illinois Senate Passes Bill to Raise Taxes on Sports Betting Industry

The Illinois Senate has passed its version of a progressive tax rate structure for sports betting operators in the Land of Lincoln. It could result in our best sportsbooks paying more to needy state and local coffers.

On Sunday night, the state Senate voted for an increase in taxes for legal Illinois sports betting providers, with the expectation that it would pass through the House of Representatives and be signed into law by Gov. JB Pritzker.

Illinois currently taxes its sports betting providers at 15%, which is fairly low compared to other states. Under the new plan, tax rates could go up to 40% for the most successful sportsbooks in terms of revenues in the state.

The New York sports betting scene currently has a 51% tax rate for sports betting operators, and Pennsylvania sports betting rate is 36%. Both are a flat rate, while Illinois is proposing a more convoluted and complicated progressive/graduated tax rate that will be explained below. 

Illinois sports betting apps and the state’s retail providers have helped make Illinois a consistent top-three jurisdiction in the broad U.S. legal sports betting family. In March alone, Illinois' best sportsbooks accepted more than $1.26 billion in bets and reported over $100 million in revenue. In 2023, those same providers combined for over $1 billion in revenue. Residents clearly love Illinois sportsbook promos.

Now lawmakers want them to ante up and contribute a little more in taxes to the state.

House Bill 4951

HB 4951 was passed by the Illinois Senate by a 37-22 vote on Sunday, paving the way for a “progressive” tax structure for state providers. That rate depends on revenues for participating sportsbooks. The more you make, the more you pay.

The bill would amend the current 15% tax rate and swap it out for one that would see a graduated tax. The first $30 million in adjusted gross revenue is taxed at 20%, the next $20 million would be taxed at 25%, anything from $50 million to $100 million in AGR would be taxed at 30%, revenue from between $100 million and $200 million would pay a 35% tax and all revenues above $200 million would be taxed at the maximum 40%.

HB 4951 would make Illinois the first state to adopt a purely progressive tax rate for its sports betting industry.

Hurting the big guys?

Like many across the U.S., the Illinois market is dominated by FanDuel and DraftKings. In March, FanDuel accounted for 41.5% of the state’s total sports betting revenue, while DraftKings made up 33.4%. Suffice it to say, the big two will be paying a lot more tax if the House Bill comes to fruition.

Each has easily climbed over the $200 million mark in terms of revenues in Illinois, and each will be subject to the highest tax rate for a portion of its revenues at least. 

An amendment was made on Saturday before the vote Sunday in which the tax rates would be treated as separate, meaning that only revenues over $200 million would fall under the max tax rate. The first $30 million would still be taxed at 20%, and the next $20 million would still be taxed at 25%, and so on. Again, only revenues over $200 million would be charged a 40% tax.

Ruffling some feathers?

The increase in the tax rate for Illinois sports betting apps and retail providers has been long rumored in the Land of Lincoln. Gov. Pritzker has been proposing a tax increase from 15% to 35% for some time now and may get a chance to sign into law a different plan with largely the same outcomes - increasing taxes on state providers.

Some providers in the state are not happy with the decision and the support that such a hike has gotten among lawmakers. The Sports Betting Alliance, which includes Illinois sportsbooks DraftKings, FanDuel, BetMGM, and Fanatics, is one group that has spoken out about the pitfalls of such an increase.

According to SBA president Jeremy Kudon, “Sportsbooks across the industry will have no choice but to reevaluate their level of investment and participation in the state should this become law.”

Price of doing business

The proposed increase in taxes for Illinois' best sports betting apps may be unpopular among state operators, but it looks like it will just be the price of doing business. Sportsbooks are thriving, and the state wants them to pay a little more for the chance to operate in America’s third-best legal sports betting jurisdiction.

Ohio sports betting doubled tax rates on its legal sports betting scene last year, Illinois is on the verge of raising its tax rate on its providers, and other jurisdictions around America are on the verge of their own tax hikes.

With the industry booming, it just isn’t just legal sports betting providers looking to cash in… state and local governments have also signaled their intent to do so.