New Illinois Sports Betting Tax Rate Goes Into Effect on July 1

Gov. JB Pritzker speaks at the Hoogland Center for the Fine Arts Thursday, May 2, 2024. © Thomas J. Turney/The State Journal-Register / USA TODAY NETWORKGov. J.B. Pritzker signed the state’s budget into law this weekSportsbooks will see an increase in their sports betting tax ratesThe new rate will be based on adjusted gross revenues

Gov. J.B. Pritzker (D) signed the Illinois FY 2025 budget into law this week, which includes a new progressive tax rate for licensed state sportsbooks.

Pritzker signed the $53.1 billion spending plan into law, much to the chagrin of Illinois sports betting operators. The state budget includes the first-ever progressive tax rate for sports betting operators in the country, which will see sportsbooks pay a rate of 20% to 40% based on adjusted gross revenues.

The progressive tax rate is expected to bring nearly $200 million more in revenues to the state.

Pritzker: Nobody Leaving New York

The new tax rate will go into effect on July 1.

As the budget moved through the legislative process last month, several sportsbook leaders decried the new progressive tax rate, which will see every licensed operator pay more than the original 15% rate.

Sports Betting Alliance President Jeremy Kudon announced the heightened tax rates will result in a worse product, worse promotions, and worse odds for Illinois customers.

“This is an extremely disappointing decision that will cause real harm. Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget tonight that would make Illinois sports betting tax the second highest in the country and counterproductively penalizes sports betting operators who invested millions into the local economy and created jobs in the state,” he said.

Sports betting operators will likely have to decide if doing business in Illinois is worth it for them with the elevated taxes, he said.

Pritzker addressed the changes to the sports betting tax rate with the media after signing the budget, expressing doubt that operators would leave the state.

Nobody is leaving New York, he said, which has a 51% sports betting tax rate.

“There are people who say that there will be sports betting companies who get up and leave if we go to what balances out to about 35%, it’s a graduated system. They’re not leaving New York and they’re not leaving other states. We’re the third largest sports betting market for sports betting companies. We had a much lower tax rate than many of the largest of those markets, and we’re bringing ourselves more in line but at a lower rate,” he said.

First Progressive Sports Betting Tax Rate

The new progressive sports betting tax rate is the first of its kind in the country.

Coming into the budget season, sportsbook operators in Illinois were up in arms after Pritzker suggested increasing the state’s sports betting tax rate from 15% to 35% in his budget proposal. Now, however, operators may have to pay up to a maximum 40% rate based on their adjusted gross revenues.

Based on the new structure, operators will have to pay taxes based on the following adjusted gross sports betting revenue totals:

$0 to $30 million: 20%$30 million to $50 million: 25%$50 million to $100 million: 30%$100 million to $200 million: 35%Over $200 million: 40%

Operators will also be required to pay separate taxes based on the sliding scale for both retail and online sportsbooks.

Currently, FanDuel and DraftKings would be the only two operators in Illinois to be in that top-tier tax structure and have to pay a 40% rate. FanDuel totaled more than $421.3 million in adjusted gross revenue and DraftKings reported $349.9 million.

BetRivers and Fanatics Sportsbook, totaling $81.1 million  and $51.6 million respectively, would see their rates increase from 15% to 30% under the new plan. Caesars, ESPN BET, and BetMGM would see their rates increase to 25% as well.