Illinois Includes Progressive Tax on Sports Betting in 2025 Budget

The Land of Lincoln will change how sports betting operators are taxed.

The Illinois House voted to officially approve a new progressive tax rate for sports betting operators in the state. House committees earlier this week approved the proposal, adding it to the 2025 budget. The budget was approved and is now only awaiting a signature from Governor J.B. Pritzker, who led the charge to raise the state’s tax rate.

Once the 2025 fiscal year begins, online sportsbooks will be taxed at a rate ranging between 20% and 40%. The rate will depend on each operator's revenue, meaning the most profitable sportsbooks will pay more in taxes. 

FanDuel and DraftKings are the two operators who will be hit hardest by the new tax. They have dominated the market and will fall into the highest tax tier once the new system begins. That is a massive increase from the 15% they have been paying in the past. The other operators will see a slight bump in tax rates but will be far lower than the two industry giants. 

The Sports Betting Alliance (SBA) had been fighting hard against any increase in the tax rate. They told customers that an increase would lead to worse odds and fewer promotions, but the Illinois legislature has called their bluff.

Time will tell how the SBA and the state’s seven online sportsbooks respond.

Progressive Tax Could Spread Across the Industry

Many states have discussed raising their sports betting tax rates due to the eye-popping numbers being produced. Some have settled for a small bump across the board, but Illinois’s progressive tax system could change that.

Not only does the progressive tax rate cut into FanDuel and DraftKings' massive revenue numbers, but it also gives their smaller competitors a fighting chance. The industry has been shrinking as more sportsbooks struggle to find users, thanks to the two sportsbooks owning over 80% of the market share countrywide. 

If Illinois sportsbooks do not follow through on their threats to adjust odds and limit promotions, other states will be able to follow suit quickly.