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Illinois senate passes “penal”, progressive sports betting tax

| By Jill R. Dorson
Late on Sunday (26 May), Illinois senators passed a FY2025 budget that includes a sports betting tax hike that will most affect the state's biggest operators.
illinois progressive wagering tax

The Sports Betting Alliance (SBA) called the budget an “extremely disappointing decision that will cause real harm”. The proposal nearly triples the tax rate for the most successful operators.

Sunday’s version of the budget, passed by the senate, is different from the house proposal. It would make Illinois the second-most expensive state for wagering operators to do business in.

At the highest end of the scale, the operators with the highest adjusted gross revenue would pay a 40% tax. Only New York’s 51% is higher for a state with a competitive market.

The vehicle for the tax is HB 4951, which did not include the progressive sports betting tax when the house approved it. The bill now goes back to the house for concurrence.

Even smallest operators will pay more

Late Saturday (25 May), the house adjourned until after the holiday weekend and, at that time, a proposed progressive sports betting tax was already circulating in Springfield.

Operators have been paying a 15% tax since sports betting went live in June 2021. Earlier this year, Governor JB Pritzker proposed an increase to 35%. The senate version of the budget goes beyond that, even on the low end.

Under the sliding scale, the cheapest tax would be 20% and the highest 40%. The senate’s progressive sports betting tax separates AGR for retail and digital sportsbooks. If an operator has retail and digital sportsbooks, it appears it would pay separate taxes for each, although the cutoffs are the same.

  • 20% tax on AGR up to $30m
  • 25% on AGR of revenue between $30m-$50m
  • 30% on AGR of revenue between $50m-$100m
  • 35% on AGR of revenue between $100m-$200m
  • 40% on AGR of revenue over $200m

The new scenario represents at least a small savings versus the original scenario for some operators. In this framework DraftKings, for example, would have paid 20% tax on its retail AGR, which was $7m for FY2024. It would have paid 40% on its digital AGR, which was $350m.

Rush Street, as an example, would see a more significant savings under the senate scenario.

The company’s retail sportsbook had AGR of $12m for FY2024. Online AGR was $81m. Rather than pay 30% tax on all AGR, Rush Street would have paid a 20% tax on the $12m and 30% on the $81m.

SBA: Expect “‘”worse products”‘” if tax hike becomes law

The SBA, comprised of BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel, said it rallied 55,000 Illinois citizens to email lawmakers to vote against the increase.

After the vote, the SBA response to the senate was swift and direct. Lobbyist Jeremy Kudon tweeted out a statement saying the proposed progressive sports betting tax “counterproductively penalises sports betting operators who invested millions into the local economy and created jobs in the state.

“This tax hike means worse products, worse promotions and, inevitably, worse odds for Illinois customers – not to mention provide a massive leg up to the dangerous, unregulated illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations.”

Kudon went on to say that should the proposal become law, sportsbooks would have “to reevaluate their level of investment and participation in the state”.

In March DraftKings opened its second brick-and-mortar location in Illinois at Wrigley Field. It also has a retail sportsbook at Casino Queen East St Louis. FanDuel has built out three in-person sportsbooks at the United Center, the former Fairmount Park and Par-a-Dice Casino.

Illinois would become the second state and first big US market with a progressive sports betting tax tax. In Arkansas, all casino revenue is taxed at 13% for the first $150m and 20% for revenue above $150m. Sports betting revenue is included in casino revenue.

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