Illinois Includes Progressive Tax on Sports Betting in 2025 Budget

The Land of Lincoln took center stage in the sports betting industry over the holiday weekend.

The Illinois Senate amended the state’s 2025 budget to include a new progressive tax rate for sports betting operators. The new tax rates would range from 20% to 40%, determined by the revenue generated by each sportsbook. The goal is to ensure sportsbooks pay their fair share while helping smaller operators compete.

The state’s online sports betting operators have vehemently opposed any change to the current tax rate. Governor J.B. Pritzker's original proposal would have raised the tax from 15% to 35% across the board. The new proposal would lessen the blow for all but two operators, with FanDuel and DraftKings receiving the highest tax rate of 40%. A 40% rate would be the second-highest in the country if passed.

“This is an extremely disappointing decision that will cause real harm,” Sports Betting Alliance (SBA) President Jeremy Kudon said of the proposal. “Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget tonight that would make Illinois sports betting tax the second highest in the country and counterproductively penalizes sports betting operators who invested millions into the local economy and created jobs in the state,” 

The bill will now move on for a vote on the Illinois House floor.

New Proposal Sets up Battle With National Implications

Several states are currently considering raising tax rates for sports betting operators. The SBA has fought hard against these, claiming increased rates would lead to watered-down odds and fewer promotions. However, a progressive rate could give smaller operators better promotions and odds than their larger competitors, helping slow the rate of cannibalization in the industry. 

New Jersey is another state considering a massive change in tax rate, raising it to an industry-high 51%. The SBA has been aggressive in its challenge of that rate and recently shown a roundtable discussion is the state’s top regulator. 

The battle is being fought in public, with the SBA appealing to bettors for support as they oppose hikes that could create a worse market.