A coalition of U.S. sportsbooks is challenging Chicago’s new sports betting tax in court.
Key Takeaways
- The Sports Betting Alliance claims Chicago is violating the Illinois Constitution.
- A temporary restraining order was filed on Tuesday so online sportsbooks can remain operational and not take regulatory risks.
- A delay request to the Chicago mayor was denied.
The Sports Betting Alliance (SBA) confirmed Tuesday that it filed a lawsuit in Cook County and a request for a temporary restraining order against the city’s new licensing requirements.
The SBA – composed of FanDuel, DraftKings, BetMGM, Fanatics, and bet365 – claims that Chicago’s budget plan, which raises the tax to 10.25% on online wagers placed within the city, is “invalid and unconstitutional” under Illinois law.
“The State – not the City – has sole authority to license and tax online sports wagering in the State of Illinois,” the SBA states in the complaint. “The Illinois Constitution reserves authority over licensing for revenue and income-based taxation to the State unless expressly delegated. The Illinois General Assembly has never authorized the City to impose licensing fees or income-based taxes on online sports wagering.”
Illinois already has one of the highest and most unique tax structures in the U.S. Operators are on a progressive tax scale, starting at 20% and going up to 40% of their gross revenue. Online sportsbooks are also paying a 25-cent or 50-cent tax surcharge on all wagers placed, which was instituted in July by Prairie State lawmakers.
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Licensing issue
The online sportsbooks are also concerned that they are operating without licenses on Thursday, when the city’s new budget takes effect.
“Despite prior assurances that licenses could and would be issued on December 29, 2025, as of the time of filing this Complaint, the City of Chicago has not issued the required municipal license to any SBA member or to its master license holder,” the SBA said in the filing. “Nor has the City provided a formal determination as to whether any SBA member will receive a City license for online sports wagering by the December 31, 2025, deadline.”
The SBA claims that shutting down would cause “irreparable harm” to their business and standing with Illinois sports betting regulators. The coalition also believes doing that would force Chicago bettors to the unregulated market.
The City Council has also approved an annual operator licensing fee, which takes effect on Thursday, that the SBA says violates the Illinois Constitution. The temporary restraining order request is for a judge to suspend that requirement.
“Further confirming the license requirement is directed at generating revenue, the City charges $50,000 for a primary sports license in the initial year and $25,000 for each year thereafter, and $10,000 for a secondary sports license in the initial year and $5,000 for each year thereafter,” the SBA argues. “These fees exceed those imposed on all other types of businesses.”
Delay denied
The SBA says it took legal action after it urged Chicago Mayor Brandon Johnson in a letter on Dec. 18 to delay the tax and license requirements so operators could seek clarity and be in compliance of the city’s order.
However, the SBA claims no delay was given, leading to the lawsuit.
“The SBA and its members have used every available day since the Chicago Ordinance Amendments’ passage in a concerted effort to avoid irreparable injury by securing licenses from the City or delaying their implementation,” the SBA said in the filing. “But those efforts have been unsuccessful, putting the SBA members in jeopardy of either violating the Ordinance, as interpreted by the City, after midnight on New Year’s Eve, or ceasing online sportsbook operations within the City entirely.”
