Illinois Governor Signs New Sports Betting Tax Into 2025 Budget

The state of Illinois has enacted a new tax structure for online and retail sportsbooks. Signed into law by Governor JB Pritzker as part of the state’s $53.1 billion budget for 2025, this tax hike aims to generate an additional $1.1 billion in revenue for the Land of Lincoln. However, the industry’s major players have voiced their concerns, warning that these elevated tax rates could potentially price them out of the Illinois market.

This represents a significant departure from the previous 15% tax rate, with the top tier reaching a staggering 40% on sportsbook revenue exceeding $200 million. Notably, the tax will be assessed separately for online and retail operations, rather than being combined.

With this new tax regime, Illinois has positioned itself alongside New York and New Jersey as one of the few U.S. states to have surpassed the $1 billion mark in sports betting revenue for 2023. The state’s impressive haul of over $150 million in tax revenue for the year has undoubtedly contributed to Governor Pritzker’s desire to further capitalize on this growing industry.

The Sports Betting Alliance, a coalition that includes industry heavyweights like DraftKings, FanDuel, BetMGM, and Fanatics Sportsbook, has vehemently opposed the tax hike. They argue that the new rates will force them to fundamentally alter their business models or even consider withdrawing from the Illinois market altogether.

Analysts at the banking firm Jefferies, however, have dismissed these concerns, suggesting that the industry’s reaction may be an overreaction. Nevertheless, the news of the tax increase has had a tangible impact on the stock prices of leading sportsbook operators, with DraftKings and FanDuel both experiencing a negative market reaction.

The middle and upper tiers of Illinois’ new tax rates have propelled the state into the upper echelon of sports betting taxation in the United States. New York currently holds the distinction of the highest tax rate at 51%, while Pennsylvania’s rate stands at 36%. Illinois’ new progressive structure has effectively positioned it among the most aggressive tax regimes in the country.

The reverberations of Illinois’ tax hike are not limited to the state itself. Industry experts have expressed concerns that this move could set a troubling precedent, with other states potentially following suit. Indeed, New Jersey legislators have already proposed raising their state’s tax rate from 13% to 30%, while a Massachusetts Senate bill had sought to increase the rate from 20% to 51% (though it ultimately failed to gain traction).