Will Illinois Tax Increase Send FanDuel, DraftKings Packing?

Of course, the sports betting tax hike in Illinois makes the two sportsbook leaders angry. Their talk about re-evaluating the state is nothing more than letting out some steam. Or is it?

Will Illinois Tax Increase Send FanDuel, DraftKings Packing?

When Illinois Gov. J.B. Pritzker signed the state budget last week with a gargantuan tax increase for sportsbooks, operators threatened to think twice about their investment in the state.

They argue that revenue will decline as a result of paying a tax that will jump from 15 percent to a graduated scale that starts at 20 percent and climbs to as much as 40 percent. Pritzker says it’s all about paying a fair share.

But when FanDuel and DraftKings—who bring in the most money thus paying the most in taxes—insist they need to reevaluate their operations in the state, some believe they’re just blowing smoke.

“It’s a completely non-credible threat. Of course, they don’t want to pay higher rates, but there’s no evidence they can’t pay. At the end of the day, they’ve made hundreds of millions of dollars selling a wildly addictive product, and the government should tax that,” Victor Matheson, an economics professor at the College of the Holy Cross, said in a Chicago Sun-Times report.

DraftKings, FanDuel, and other members of the Sports Betting Alliance (SBA) railed about the tax hike during the legislative session. Indeed, the initial pitch of a 35 percent Pritzker led to complaints from both Republicans and Democrats.

In 2022, FanDuel paid $62 million in state taxes with DraftKings on the hook for $48 million. Under the new graduated tax, FanDuel would have owed $145 million, and DraftKings $109 million, according to Yogonet Gaming News.

“This tax hike doesn’t just threaten the legal, regulated sports betting market, it will have devastating effects for operators’ in-state partners, including the most vulnerable downstate casinos, who rely on sports betting revenue to create jobs and invest in communities,” Jeff Kudon, executive director of the SBA, said in a statement on social media.

The governor’s office predicts the taxes will raise over $200 million a year for the state.

What still needs to be played out is the impact the tax increase will have on a potential introduction of online casinos, which involves most of the same operators.

The odds don’t favor iGaming expansion. The relationship between operators and lawmakers leaves a negative mark. But truth be told, the Internet Gaming Act moved nowhere on introduction in 2023 and remains active in 2024. Sponsors see the effort as a “long-term project.”