Illinois Governor signs 40% sports betting tax into law despite opposition
JB Pritzker’s backing of 2025 budget will see an end to 15% flat rate and introduction of sliding scale model that trade bodies have warned will have a negative impact on market
Illinois Governor JB Pritzker has signed the state’s new $53.1bn budget package for the 2025 financial year into law, implementing new tax thresholds for sports betting operators in the process.
House Bill 4951 was approved last week after the Senate had unanimously backed the proposals, with Pritzker now officially ushering the changes into law.
As a result, Illinois will become the US state with the second-highest tax rate on gross gaming revenue (GGR) at 40% top rate tax, behind only New York at 51%.
New Hampshire applies a 51% rate, although that market is deemed as non-competitive, with DraftKings serving as the de facto monopoly operator in the state.
The 40% rate only applies to operators that surpass $200m in annual revenue derived from Illinois, with new legislation also outlining brackets for rates of 20%, 25%, 30% and 35%.
There are just two operators who would be subject to the 40% bracket in DraftKings and FanDuel. The former generated revenue of $421m in 2023, while the latter posted $350m in the same time period.
Estimates have suggested the tax hike could bring in around $200m for the state’s General Revenue Fund.
In comments reported by ABC7, Pritzker said fears operators would exit Illinois over the tax hikes were overstated. The Democrat had previously wanted to raise the tax to a flat 35%.
He said: “They’re not leaving New York, and they’re not leaving the other states.
“You see we’re the third largest sports betting market for sports betting companies, and we had a much lower tax rate than many of the largest of those markets,” he added.
On the remainder of the budget, which includes an additional $350m for K-12 education funding, $900m for state prison renewal and $3.5bn on infrastructure, Pritzker said: “The budget is another demonstration of the fiscal responsibility that has guided me from day one of my administration.
“This budget is balanced, pro-family, cuts taxes on workers, and opens up doors of opportunity for employers and employees alike.
“This budget builds on years of economic momentum that is revitalizing communities up and down the state of Illinois. We are on a trajectory of sustainable long-term growth.
“I’m proud to sign it today and look forward to working together to bring these investments to life in a healthier, more prosperous Illinois,” he added.
The Sports Betting Alliance (SBA), which represents the likes of FanDuel, DraftKings, Fanatics and BetMGM, has yet to make a fresh statement following Pritzker’s decision.
However, the trade body had previously warned over significant negative impacts should the tax hike be implemented.
The body said: “This tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers — not to mention provide a massive leg up to dangerous, unregulated and illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations,” the group claimed.
A recent analysts note from Citizen JMP Securities predicted that Illinois’ tax hike could spark similar movement from other states.
It read: “The last year has brought on a tax rate increase from Ohio, and now Illinois, with states including New Jersey and Massachusetts, flirting with the idea of increasing their respective rates.
“We find it interesting states are now turning back to tax rate adjustments for online gaming when tax changes have been non-existent in states with brick-and-mortar casino gaming.
“The floodgate is now open, in our view, whereby state legislators have found a way to increase tax revenue with little to no effort. The current wave of increasing the tax rate will create an overhang on the industry.”