The Sports Betting Alliance (SBA) has labeled the budget as an “extremely disappointing decision that will cause real harm.”
The proposed budget nearly triples the tax rate for the most profitable operators.
The version of the budget passed by the senate on Sunday diverges from the house proposal.
If enacted, Illinois would become the second-most expensive state for wagering operators, with the highest adjusted gross revenue operators facing a 40% tax. Only New York’s 51% rate is higher for a competitive market.
The tax vehicle is HB 4951, which originally did not include the progressive sports betting tax when approved by the house.
The bill will now return to the house for concurrence.
Late Saturday, May 25, the House adjourned for the holiday weekend while a progressive sports betting tax proposal circulated in Springfield.
Since sports betting began in June 2021, operators have been paying a 15% tax. Earlier this year, Governor JB Pritzker proposed raising this to 35%.
The senate version surpasses this, with a sliding scale starting at 20% and going up to 40%.
The progressive tax separates AGR for retail and digital sportsbooks, potentially requiring separate taxes for each.
The tax rates are structured as follows:
- 20% on AGR up to $30m
- 25% on AGR from $30m to $50m
- 30% on AGR from $50m to $100m
- 35% on AGR from $100m to $200m
- 40% on AGR over $200m
This scenario offers some savings for operators compared to the original proposal.
For example, DraftKings would pay a 20% tax on its retail AGR of $7m and 40% on its digital AGR of $350m for FY 2024.
Rush Street would also benefit, paying 20% on its $12m retail AGR and 30% on its $81m online AGR.
The SBA, which includes BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel, mobilized 55,000 Illinois citizens to email lawmakers against the tax increase.
After the vote, SBA lobbyist Jeremy Kudon tweeted a statement, criticizing the progressive tax for “penalizing sports betting operators who invested millions into the local economy and created jobs in the state.”
He warned that the tax hike would result in “worse products, worse promotions, and worse odds for Illinois customers,” and benefit unregulated offshore sportsbooks.
Kudon added that sportsbooks might need to “reevaluate their level of investment and participation in the state” if the proposal becomes law.
DraftKings has recently opened a second brick-and-mortar location in Illinois at Wrigley Field and has a retail sportsbook at Casino Queen East St. Louis. FanDuel operates three in-person sportsbooks in the state.
If enacted, Illinois would be the first major US market with a progressive sports betting tax, following Arkansas’ example.