Illinois Progressive Sports Betting Tax Signed Into Law

The way that the sports betting industry in Illinois will be taxed is about to change, to the benefit of tax coffers but the chagrin of the most popular and best sports betting sites in the state.

On Wednesday, Illinois Gov. JB Pritzker signed his fiscal year budget for 2025, which included a fundamental shift in the way that one of the most successful legal sports betting jurisdictions in the country will tax the Illinois sports betting apps. A new “progressive tax” will go into law July 1.

In February, Pritzker suggested raising the current 15% flat tax rate to 35% for Illinois sports betting sites. His goal was to increase revenue for the state, a goal that was adopted by lawmakers but taken to the next level.

Both chambers proposed, debated, amended, and, finally, passed HB 4951. It dramatically changes the way taxes will be collected from providers in Illinois. With Pritzker signing off on the legislative plan, tax revenue from Illinois' best sports betting apps will increase dramatically.

What HB 4951 says

HB 4951 will ensure that Illinois will have one of, if not the most unique sports betting tax structure in the country. It takes the current 15% flat tax rate for providers and spikes that rate up to as high as 40%, depending on revenues generated by the participating sites with the best Illinois sportsbook promos.

It makes Illinois the first state to adopt a purely progressive tax rate for state providers. The Bill is a tad convoluted but aims to make sure the providers that earn the most pay the most in terms of taxes to the state.

Under the Bill, the first $30 million in annual adjusted gross revenue for providers will be taxed at 20%, the next 20 million will be taxed at 25%, from $51 million to $100 million will be taxed at 30%, from $101 million and $200 million in adjusted gross revenue will be taxed at 35%, and anything over $200 million in revenues will be taxed at 40%.

A last-minute amendment ensured that each tax rate would be treated as separate, meaning that revenue generators of $200 million and above would not be taxed 40% on the full amount. Such companies will still face a 20% tax on their first $30 million, a 25% tax on the next $20 million, and so on.

Pushback

The biggest and best sportsbooks in Illinois pushed back against the idea of raising taxes on the industry. The Sports Betting Alliance, which consists of DraftKings, FanDuel, BetMGM, and Fanatics Sportsbook was one of the vocal organizations against such a tax hike.

SBA president Jeremy Kudon went as far as saying before HB 4951 was signed into law that “sportsbooks across the industry will have no choice but to re-evaluate their level of investment and participation in the state should this become law.”

It turns out, based on projections, that DraftKings and FanDuel are the only two sites with the best sportsbook promos that will be levied the highest tax as the only two earning over $200 million in gross revenues for the year. Those two made up almost 75% of Illinois' total handle and revenue totals in March.

Looking at bigger picture across America

Participating legal sports betting states have started to re-evaluate their tax structure for the best live betting sites in their jurisdictions. Illinois wasn’t the first and likely won’t be the last.

The tax rate doubled from 10% to 20% in the Ohio sports betting scene last year, while the legislature for the New Jersey sports betting scene could also experience a similar increase, and there's a Bill on the floor to do so.

The only state to recently reject any sort of increase to the tax rate was for the Massachusetts sports betting scene.

States look as though they are trying to catch up to the tax rates seen in two of the country’s biggest and most successful sports betting jurisdictions. New York sports betting apps are taxed at 51%, while Pennsylvania sports betting apps are taxed at 36%.

At the end of the day, sportsbooks are falling victim to their own success. They are generating massive revenues in the U.S. market and various states are looking to ensure that they pay their fair share.