Illinois Proposes Major Tax Hike on Sports Betting to Boost State Revenue

Central to this plan is a significant proposal to increase state revenue by adjusting the tax structure on sports betting operations within Illinois, a state already recognized for its vibrant sports betting market.

Illinois Sports Betting Landscape

In the past year, Illinois has seen a staggering $11.6 billion in sports wagers placed through its 11 physical and eight online sportsbooks. With the sports betting industry retaining approximately $1 billion from these bets, the state collected around $150 million in taxes based on the current 15% tax rate.

Given the scale of sports betting in Illinois, Governor Pritzker, a second-term Democrat with a background in the Hyatt hotel chain, proposes a bold move to more than double the tax rate on sportsbook operators’ winnings from 15% to 35%.

Tax Proposal Impact

This proposed tax adjustment is poised to significantly boost state revenue, potentially bringing in an additional $200 million based on last year’s figures. If implemented, Illinois would join the ranks of states like Pennsylvania with one of the highest sports betting tax rates in the nation, closely trailing behind the 36% rate in Pennsylvania.

The governor’s office emphasizes that this move is aimed at ensuring Illinois secures a more substantial share of the lucrative sports betting market.

Industry Response

The Sports Betting Alliance, representing major players like DraftKings, FanDuel, BetMGM, and Fanatics, has voiced concerns over the proposed tax hike. The alliance argues that legalizing iGaming could generate significantly more revenue for Illinois, estimated at $775 million annually, without jeopardizing the health of the legal sports betting and casino markets.

They caution that higher taxes might give illegal operators a competitive edge by offering better odds, potentially harming the legal market and stifling the growth of smaller, startup, and minority-owned businesses.

Budget Priorities

Governor Pritzker’s budget plan is not solely focused on sports betting taxes. It also includes provisions for addressing the needs of migrants sent to Illinois from Texas, with $182 million allocated for “welcome centers,” housing, and legal services. Pritzker’s commitment to humanitarian aid reflects his broader vision for Illinois as a state that upholds values of decency and leadership in the face of challenges.

Additionally, the governor is looking to invest in the future of technology within the state, with a $500 million earmark for expanding the quantum computing industry and establishing a cryogenics facility, positioning Illinois as a leader in cutting-edge scientific research.

Our Comment on the Proposal

Governor Pritzker’s budget proposal, particularly the sports betting tax hike, presents a bold strategy for increasing state revenue and funding critical services and initiatives. While the potential benefits are clear, the response from the sports betting industry highlights the delicate balance between taxation and market health.

As Illinois navigates these changes, it will be crucial to monitor the impact on the sports betting ecosystem, ensuring that growth and compliance among operators continue to thrive under the new tax regime. This move by Illinois could set a precedent for other states, making it a significant moment in the evolving landscape of US sports betting regulation.