Complaints about the high Illinois sports betting tax rates may be falling on deaf ears, as Chicago officials believe another hike could be a net positive for the city.
Illinois’ exorbitant tax rates have already caused sportsbooks to introduce one-off policies, such as per-wager taxes and betting minimums. Despite that, Chicago’s Financial Future Task Force said in a recent report that taxing sports wagers could help reduce a $1.1 billion FY2026 deficit.
The report indicated that a $.25 tax on every bet placed would raise $8.5 million per year. A possible $.50 per-bet add-on was also discussed.
Dealing with rising tax rates
Illinois’ extreme sports betting rates were poorly received by bettors and sports betting operators across the nation.
On July 1, 2024, the state introduced a sliding scale that charged operators 20% to 40% of their adjusted gross revenue. That replaced the previous flat rate of just 15%.
The sliding rate didn’t cause massive outrage. It was the state’s introduction of the per-bet tax earlier this year, which charged sportsbooks $.25 for each of their first 20 million wagers and $.50 for every wager beyond that. Had the state enforced this policy in 2024, Illinois would’ve received an additional $159 million in sports betting taxes on top of the $276 million that was already generated.
Having taken note of the tax benefits for the state, the Chicago Task Force encouraged local officials to implement a similar policy.
“We recommend the city consider placing a $0.50 tax on all wagers placed via online betting in the city of Chicago. This would generate an incremental $17 million in estimated revenue annually.
“Both ends of the estimated range assume that at least 20% of all bets in the state are placed in the city and assume a 10% loss rate due to some individuals avoiding the tax by placing bets outside of the city.”
Sportsbooks respond
The Sports Betting Alliance (SBA), which is a trade group of several of the top sports betting companies in America, released a statement denouncing the per-bet tax proposal in Chicago.
According to the SBA, the effective tax on a $1 wager would be 100%. They also said that more than half of sports bets that are placed in Illinois are for $5 or less, meaning that every wager would effectively be taxed at a minimum of 20%, the SBA said.
“The tax also risks more fans entering the cheaper, illegal market, which is a growing concern of the state’s top consumer advocates: the Illinois attorney general and the Better Business Bureau. Unregulated, offshore operators offer cheaper sports betting alternatives for consumers, without any protections – including age verification – and without any oversight, not to mention no tax revenue whatsoever.”
The responses from sportsbooks – including per-bet taxes of their own, or minimum bet sizes – were meant to offset the increase from the state. However, that resulted in less profitability for consumers.
Another per-bet tax would likely motivate sportsbooks to add another per-bet surcharge or increase their betting minimums, which would again lead to less desirable circumstances for customers.
The city of Chicago has not approved or rejected the recommendation from the task force.