Illinois Gov. JB Pritzker signed the state’s $53.1 billion budget for Fiscal Year 2025 into law Wednesday, ushering in a fundamental change to sports betting tax rates in one of the largest marketplaces in the United States starting July 1.

HB 4951 passed during an all-night legislative session one week ago, with the House of Representatives voting in favor of concurrence for five Senate amendments after the bill passed in the upper chamber.

Pritzker’s original budget ask in February proposed more than doubling the tax rate from the current 15% to 35% as a means of raising an estimated $200 million in revenue, but the progressive tax that passed in the bill gained momentum during the Memorial Day holiday weekend after being introduced May 25.

“The FY25 budget is another demonstration of the fiscal responsibility that has guided me from Day 1 of my administration,” Pritzker said. “This budget is balanced, pro-family, cuts taxes on workers, and opens up doors of opportunity for employers and employees alike. I’m proud to sign it today and look forward to working together to bring these investments to life in a healthier, more prosperous Illinois.”

The bill passed despite well-voiced opposition from the Sports Betting Alliance, which represents mobile operators FanDuel, DraftKings, BetMGM, and Fanatics Sportsbook.

Based on a review of sports betting revenue in Illinois in the most recent 12-month period of figures available covering April 2023 through March, only FanDuel and DraftKings had generated enough revenue to reach the top tax rate of 40%, which would take effect when an operator surpasses $200 million in revenue.

Pritzker’s signature makes Illinois the first state to have a progressive tax rate dedicated solely to sports betting. Arkansas has a progressive tax rate for all gaming revenue, with sports betting taxes increasing from 13% to 20% when a licensee surpasses $150 million in total winnings. Illinois also became the 11th state to have any portion of sports betting revenue taxed at 20% or higher.

Our work advances fiscal stability while investing in the state's future and putting money back in the pockets of hardworking Illinoisans.

This is how we open up doors of opportunity for everyone for years to come. pic.twitter.com/uoEQr9k0Jt

— Governor JB Pritzker (@GovPritzker) June 5, 2024

The tax rates and revenue thresholds for individual operators are as follows: The first $30 million in adjusted gross revenue would be taxed at 20% with the next $20 million at 25%. Revenue from $50 million to $100 million would be taxed at 30%; revenue from $100 million to $200 million at 35%; and all revenue above $200 million at 40%.

The 40% tax tier, if reached, would be the second-highest in the U.S. behind the 51% tax on revenue generated by mobile sportsbook operators in New York. Illinois generated $150.3 million in state taxes in 2023 as total operator sports betting revenue surpassed $1 billion.

One amendment introduced by the state Senate and passed Sunday that required House concurrence kept the progressive tax rates in place but separated mobile and retail sportsbook revenue as separate entities. The separation of revenue into two distinct buckets for taxation will put a slight drag for licensees with sports betting apps progressing to higher tax brackets when passing revenue thresholds.

It can be argued that amendment most benefits Rivers Casino, home to BetRivers. The Des Plaines-based venue led all retail sportsbooks with $11.8 million in revenue in 2023 and was the only licensee to reach eight figures.

Illinois’ new tax structure, coupled with Ohio Gov. Mike DeWine doubling his state’s rate from 10% to 20% last July, has sparked concerns among both industry operators and investment groups that other states could follow suit and raise taxes on sports betting.

DeWine, though, pushed for the increase in response to the barrage of aggressive advertising by operators versus Pritzker’s call to generate more tax revenue. The Buckeye State generated $79.2 million in levies in the second half of 2023 compared to $54.3 million in its first six months after launch.

New Jersey currently has a bill in the legislature that would more than double the tax rate on mobile sports betting revenue from 13% to 30%. Meanwhile, the Massachusetts Senate quickly rejected a proposed budget amendment to raise its online levy from 20% to 51%, which would have matched New York as the highest in the U.S.