Illinois’ Per-Wager Tax Leading to Fewer Bets, But More Revenue

It has been over five months since Illinois imposed a controversial per-wager tax on all online sportsbooks, and we are finally seeing the fallout from that decision.

The September results for the Illinois sports betting market are in, and they show some interesting results. The number of wagers dropped by 15% year-over-year, while the handle increased by 9%. That average bet amount rose by $10, helping to generate over $10 million more in tax revenue.

While fewer bets are being placed, this is likely the result of small or casual bettors being pushed out. Several sportsbooks have added their own per-wager fee or raised their minimum bets to offset the new tax. That made it more expensive to bet on sports, leading smaller bettors to drop the hobby.

September’s numbers signal a significant win for Illinois, whose lawmakers were under fire over the per-wager tax. The impressive bump in tax revenue negates the warnings from the sports betting industry, which believed the market would crash. With the tax revenue bump, those warnings have proven to be false, at least for now.

The early success is already under threat, as Chicago considers a proposal to add a per-wager fee of their own. State lawmakers have begged the city to reject the proposal, fearing it will lead to more new fees for sports bettors.

Where Are Bettors Going?

The biggest question from Illinois’ September numbers is where the bettors who have stopped placing wagers are going. There are likely many who casually placed small wagers and then gave up the hobby. However, it is unknown how many now former-bettors have taken this route.

There is growing concern that some bettors have sought out offshore sportsbooks. Those platforms carry a far higher risk, but also offer cheaper options to place wagers. Those looking to bet $1-$10 at a time can save a lot of money using those sportsbooks, leading them to take the chance on an illegal operator.

There is also the emergence of sports prediction markets to consider. While Kalshi’s volume has been impressive, its damage to the sports betting industry has been limited. That will soon change, as Polymarket, FanDuel, and DraftKings are all preparing to launch their own prediction platforms. Those operators don’t pay state taxes and have little focus on problem gambling, and markets have no power to regulate them.