The Land of Lincoln is proving to be an increasingly costly place to do business for online sportsbook operators.
- Illinois lawmakers passed another tax on online sportsbook operators as part of their budget process.
- The new annual tax, effective July 1, will be 25 cents per wager for the first 20 million bets in the state, and then 50 cents per wager after that.
- Online sportsbook operators tried to rally support against the new tax, which followed a tax hike on revenue last year, to no avail.
As part of their annual budget process, Illinois lawmakers passed a new per-wager tax on online sportsbook operators over the weekend. The move follows a considerable increase to the state’s tax on sports betting-related revenue passed last year, hiking the rate to as high as 40% for operators.
The new tax, effective July 1, will be 25 cents per wager for the first 20 million bets taken in the state in any given year. After 20 million wagers, the tax goes up to 50 cents per bet.
“We’re presenting a budget that meets this moment,” said state Rep. Robyn Gabel, a top budget negotiator, according to the Chicago Sun-Times. “It is balanced through smart cuts and through smart revenues, not balanced on the backs of working families. It uses the best information we have at this uncertain time to make the best decisions for our state.”
Illinois Gov. J.B. Pritzker has reportedly said he will sign the state's latest budget plan.
“Even in the face of Trump and Congressional Republicans stalling the national economy, our state budget delivers for working families without raising their taxes while protecting the progress we are making for our long-term fiscal health,” he said in a statement, the Sun-Times reported.
Here comes the boom
The new sports betting tax will have a quick and significant impact on online sportsbooks in Illinois. There are 10 currently operating in the state.
Illinois has also become one of the biggest and most significant states for online sportsbook operators, which makes a new per-bet tax particularly painful.
Citizens analyst Jordan Bender wrote in a note to clients on Sunday that only DraftKings and FanDuel topped 20 million wagers in the past year, “implying the tax was created to hurt those two companies more than the mid-scale companies.”
“This comes one year after the state changed the sports betting tax rate from 15% to a progressive rate, also in an effort to disproportionately hurt the top two companies in the sports betting industry, with ~75% combined market share in Illinois,” Bender added.
Bender said they estimate the gross impact to DraftKings and FanDuel by 2026 will be $79 million and $86 million, respectively, of their annual earnings before interest, taxes, depreciation, and amortization (EBITDA). That works out to approximately 5.4% of expected EBITDA for DraftKings and 2% for FanDuel.
“The mid-tier operators will have less than a $5M impact each based on our assumptions, which we believe can be nearly offset with mitigation efforts given the smaller dollar impact on the business,” Bender wrote.
What’s going on!! You know I’m a @fdsportsbook guy and Illinois is trying to take away gambling! Fill out the form to let them know you want to keep betting:https://t.co/lN7hVe93zZ
— Rob Gronkowski (@RobGronkowski) May 31, 2025
The Sports Betting Alliance, consisting of BetMGM, DraftKings, Fanatics, and FanDuel, tried to rally support against the new tax, telling Illinois residents that lawmakers were debating whether to make bettors pay a fee.
“Yes, you heard that right, every time you want to place a legal bet online, Illinois wants to charge YOU a fee,” the SBA warned.
Well, technically ...
While the new tax is technically levied on sportsbook operators, how those bookmakers will stomach the fee remains to be seen. It could be the cost gets passed on to the bettor in some way.
For example, last year’s tax hike in Illinois prompted DraftKings to propose and then ultimately scrap an idea for a surcharge on winning bets. It's possible bettors could see worse odds or fewer promotions as a consequence of the new per-bet tax.
The new tax in Illinois also comes as the legal sports betting industry is grappling with the presence of federally regulated prediction markets that are offering de facto wagering in all 50 states, albeit with no state-level taxes imposed on them.
“Historically, we and the industry have spoken to the introduction of iGaming as an offset when states need tax revenue, but that has not come to fruition, and small businesses and the routes in the state still have enough power to withstand any effort to get iCasino over the finish line,” Bender wrote. “Overall, the tax is a negative and plays into our thesis that operators will use the eventual launch of prediction markets to divert players away from sports betting in higher tax states, as it appears more likely than not to be a [second half of 2025], or 2026 event.”
