Illinois sports betting operators are going to have to deal with an unexpected tax hike in the Land of Lincoln.
The Illinois state government approved a budget plan late Saturday that changes the tax structure on sports betting from a percent on total wagers to a per-bet tax on every wager.
The tax will hit the largest sports betting operators, DraftKings and FanDuel, the hardest since they accept the most bets in Illinois.
Shattering the mold
The first-of-its-kind tax on sports betting will charge legal sportsbook operators 25 cents for the first 20 million wagers accepted and 50 cents for every wager beyond that.
Illinois Gov. JB Pritzker approved the budget after it was sent to his desk over the weekend. The new sports betting tax is among several changes expected to bring in an extra $800 million to state coffers.
The Sports Betting Alliance (SBA), a group that champions legal online sports betting and represents DraftKings, FanDuel, Fanatics, and BetMGM, ripped into the new tax after the budget was approved, per Legal Sports Report (LSR):
“For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million plus Illinois customers – this time with no warning and no consideration of the devastating impact this tax would have on the legal market.”
Last year, Illinois changed its sports betting tax system from a 15% flat rate to a tiered system ranging from 20% to 40%.
The new system will have an immediate impact. Illinois sportsbooks accepted 370 million bets last year, more than 300 million of those coming from FanDuel and DraftKings.
The state would have received at least another $140 million from those two operators alone, $159 million in total, according to LSR. That’s a whopping 57.6% of the $276 million in sports betting taxes that were generated in 2024.
Rising concerns
The general expectation is that Illinois sportsbooks will adapt their offerings to accommodate the state’s new tax method. That mostly means adjusting odds and giving worse prices to bettors, something that sportsbooks hinted at doing if tax hikes were approved. The SBA said bettors who wager small amounts will be the most affected.
“Make no mistake, this discriminatory, punitive, and constitutionally suspect tax increase on legal sportsbooks who have invested more than a billion dollars in the state will be destabilizing for regulated sports betting in Illinois. A per-bet tax most penalizes small recreational bettors – many of whom are betting a single dollar or two. Under this legislation, these popular bets will get hit with a massive 25% or 50% tax.”
The SBA noted that Illinois could’ve expanded its tax kitty by legalizing online casinos, something that only seven states have done. Estimates provided earlier this year alongside proposals to legalize online casinos suggested that an Illinois iGaming market could fetch $800 million annually.
The SBA warned that the illegal, offshore gaming market could make a resurgence in Illinois.
“With this change, lawmakers are essentially urging customers – and especially these small-dollar bettors – to switch to unsafe and unregulated sportsbooks who defy state consumer protections and generate zero taxes for state priorities. These illegal operators are the big winners from Saturday’s vote.”
Will others do the same?
The LSR report included concerns from Truist analyst Barry Jones that other states could follow Illinois' lead.
Other analysts, like Jefferies & Co.'s David Katz, are not so sure. Katz told clients in a report on Monday that Jefferies does not expect other states to follow suit.
“More concerning for the group than the initial tax impact is the possibility that other states could follow suit. While this has been a bearish Street narrative, we do not expect this to occur given specific states’ history of tax policy.”
Last year, DraftKings announced and then quickly walked back plans to implement a per-bet surcharge on wagers in Illinois, New York, Pennsylvania, and Vermont to combat the steep taxes on sports betting in those states. DraftKings, and others, may reconsider that plan going forward.
Financial fallout
DraftKings' stock fell 6% on Monday, dropping it below its 50-day moving average and cementing a 9.3% year-to-date drop.
The parent company of FanDuel, Flutter Entertainment, also saw its stock decline after Illinois’ plan was revealed.
Flutter shares dropped 2.7% on Monday, though the company’s stock is still up 16% in 2025.
MGM Resorts (BetMGM) and Rush Street Interactive, which operates BetRivers, also saw their stocks dip, while the Roundhill Sports Betting & iGaming ETF fell close to 2%.