Illinois sportsbook operators, particularly those in Chicago, are now bracing for another potential tax increase. Last week, Chicago Mayor Brandon Johnson unveiled a new financial plan, introducing a 10.25% tax on sports betting revenue as part of his proposed $16.6 billion budget for 2026. This measure is aimed at addressing the city’s substantial $1.15 billion budget shortfall. Mayor Johnson made it clear in his budget introduction that the strategy avoids raising the city’s property tax levy or resorting to regressive revenue measures. Instead, the focus is on generating progressive revenue streams by tapping into entities with the means to contribute significantly, while also modernizing government operations to enhance efficiency.
The proposed tax could potentially bring in an estimated $26 million annually. This move did not come as a complete shock to those watching the sector closely, as earlier this year, the Chicago Financial Future Task Force had floated the idea of imposing a per-wager surcharge on bets placed within the city.
For the past two years, Illinois has been at the forefront in terms of implementing tax increases related to sports betting. In 2024, Governor JB Pritzker overhauled the existing tax framework for the industry in his 2025 budget. This overhaul replaced the flat 15% tax rate on sports betting revenue with a tiered system ranging from 20% to 40%, depending on the revenue bracket of each sportsbook. This restructuring was instrumental in generating over $260 million in new taxes from the sports betting industry.
In addition to these changes, this year’s budget introduced a per-wager surcharge that affects sportsbooks operating in the state. Under this scheme, operators are required to pay 25 cents per bet for the first 20 million wagers they handle, with the cost increasing to 50 cents per bet thereafter. The previous year saw a remarkable 370 million bets placed in Illinois, with DraftKings and FanDuel each accounting for over 150 million wagers.
These developments have prompted operators to adopt various strategies to mitigate the impact of increased taxation on their profitability. Notably, five sportsbooks, including industry giants DraftKings and FanDuel, have introduced per-bet service fees. DraftKings, for instance, applies this fee selectively, exempting parlays exceeding $10, straight bets over $50, and bonus bets. Other companies like Bet365, Caesars, and Fanatics have followed suit with similar charges. Meanwhile, BetRivers and ESPN Bet have set $1 as the minimum wager amount, while Hard Rock Bet and BetMGM require minimum bets of $2 and $2.50, respectively. Circa has set its minimum bet at $10.
The wave of tax increases sweeping through Illinois is reflective of a broader national trend. In recent times, other states have also revisited their tax structures for the sports betting industry. Maryland saw Governor Wes Moore propose a doubling of the sports betting tax from 15% to 30%, though the final budget settled on a 20% increase. Ohio’s Governor Mike DeWine successfully increased his state’s tax rate from 10% to 20% in 2023. However, his subsequent proposal to double the rate again was not accepted by lawmakers. Similarly, in New Jersey, Governor Phil Murphy’s proposal to raise the tax rate from 13% to 25% was moderated by legislators to 19.75%. In Louisiana, Governor Jeff Landry signed off on a legislative change that increased the tax from 15% to 21.5%.
These tax measures reflect a growing trend among states to leverage the burgeoning sports betting industry as a means of bolstering public finances. The debate around these tax hikes often centers on the balance between generating essential revenue for public projects and maintaining a favorable business environment for operators. Proponents argue that tax increases are necessary to ensure that the benefits of a booming industry are shared more broadly, helping to fund critical infrastructure and public services. On the other hand, opponents caution that excessive taxation could stifle growth, inhibit market expansion, and ultimately reduce the overall tax base.
The situation in Chicago is a microcosm of these broader discussions. While the city seeks to address its budgetary constraints, questions remain about the potential implications for the competitiveness of its sportsbook operators. Some industry analysts express concern that higher taxes could lead operators to pass these costs onto consumers, possibly dampening betting activity and driving bettors to unregulated markets. Others, however, remain optimistic, suggesting that the market’s resilience and adaptability could mitigate these effects.
As the conversation around these tax policies continues, the sports betting landscape in Illinois and beyond remains in flux. Stakeholders—from policymakers to operators and consumers—will need to navigate the challenges and opportunities presented by these financial shifts. The path forward will likely require ongoing dialogue and negotiation to strike a balance that sustains industry growth while meeting public funding needs.
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