Seems like Illinois means business about a significant increase in taxes on sports betting. The state Senate on May 27 approved the FY 2025 budget, which includes the progressive tax gain to help pay for the spending. The lawmakers voted in favor by 38 to 21.
The House had a different proposal, thus the need for a concurrence to straighten out the disparities. The House did its part in an all-night marathon ending early on May 29, sending the legislation to Governor JB Pritzker’s desk.
It comes as no surprise that sportsbooks are unhappy with the decisions. The most successful operators will see a tax jump of almost three times.
For Illinois State Rep. Daniel Didech, the House marathon required a simple move in the wee hours of the morning in an effort to concur with the Senate. Use House Rule 67(e) to suspend Rule 72(c), which deals with the concurring or receding of amendments.
Didech’s move countered that of Rep. Patrick Windhorst who requested Rep. Randy Frese be stricken from the roll, thus keeping the Democrats from a supermajority, leading to the Didech move.
In what could be described as a night of confusion and parliamentary chess moves, more actions and votes followed and at 4:41 a.m., the Illinois Legislature sent HB 4951 to Pritzker for his signature.
Pritzker proposed to raise the tax from 15 to 35 percent earlier this year. The new Senate version went with a progressive tax from 20 to 40 percent.
A Pritzker signature also means Illinois becomes the first state with a progressive tax just for sports wagers, according to Sports Handle. Arkansas has one for all gaming revenue.
Here’s the Illinois progressive tax breakdown:
20 percent tax on adjusted gross revenue up to the first $30 million
25 percent tax on AGR between $30 million and $50 million
30 percent tax on AGR between $50 million to $100 million
35 percent tax on AGR over $100 million and $200 million
40 percent tax on AGR over $200 million
The Sports Betting Alliance (SBA), an association of sportsbook operators, gathered 55,000 Illinois residents to oppose the increase through e-mails to lawmakers. SBA lobbyist Jeremy Kudon argued the progressive tax “penalizes operators who invested in the local economy and created jobs.”
Such a tax would lead to less promotions and worse odds, the alliance said.
In 2023, Illinois earned $150.3 million in state tax revenue from sports betting on winnings of $1 billion. If the state operated on a progressive tax for 2024, Illinois would have earned more than double the amount in the first quarter.
FanDuel and DraftKings already hit the 35 percent tax bracket if in place already after reaching $100 million in revenue. No question that FanDuel and DraftKings bear the brunt of the new tax system as they are first and second in market share. For the past 12 months, FanDuel would have had an overall tax rate of 35.5 percent, with DraftKings at 34.6 percent.
For all the talk of elevating tax rates, sportsbooks did score a victory in Massachusetts where the Senate said no to a budget amendment that would have sent rates soaring from 20 to 51 percent.
Sen. John Keenan, the man pushing for the tax hike, lectured his colleagues for more than 20 minutes about the dangers of gambling and his desire for the change. Keenan sought to earmark the additional tax revenue to improve treatment of problem gamblers.
“I can’t think of a single reason why we would not raise taxation rates on online sports betting,” Keenan said.
He saw danger ahead if the state permitted lottery tickets to be purchased online. Worse still is the potential arrival of legal online casinos.
While Keenan couldn’t think of any reasons not to dramatically increase Massachusetts’ tax rate, sports betting operators have thought of plenty.
The SBA, which includes BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel, cheered the outcome. The organization had fought against a similar move in Illinois for weeks.
