Illinois Adds Progressive Sports Betting Tax Rate into 2025 Budget

The Illinois legislature was very busy over Memorial Day weekend.

The state Senate made a major update to the 2025 state budget by including a new progressive tax on sports betting operators. The proposal would create a sliding scale, with the smaller Illinois sportsbooks being taxed at 20% while FanDuel and DraftKings would be at 40%. The current tax rate in Illinois is set at 15%, which is one of the lowest in the country.

The move comes after Governor J.B. Pritzker originally proposed a hike to 35% across the board. That drew fierce criticism from the Sports Betting Alliance (SBA), which insisted a rate hike would result in a worse market for bettors. They have claimed any tax hike would lead to worse odds and fewer promotions being available for bettors. However, the progressive rate would give small betting sites little reason to do so.

The bill will now move to a vote on the Illinois House floor. If passed, it would make them the first market to implement a sliding tax scale.

The Sports Betting Alliance (SBA) has been strong in its opposition to any hike in the state. It has been going directly to its customers, letting them know that a tax rate increase would lead to a worse market, including watered-down odds and fewer sportsbook promos to make up for the lost revenue, leading to fewer winnings for bettors.

“This is an extremely disappointing decision that will cause real harm,” Sports Betting Alliance (SBA) President Jeremy Kudon said of the proposal. “Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget tonight that would make Illinois sports betting tax the second highest in the country and counterproductively penalizes sports betting operators who invested millions into the local economy and created jobs in the state,”

Legislatures in the Land of Lincoln are calling the SBA’s bluff, believing the revenue generated will still be enough to keep the market competitive.

The SBA has stood strong in the face of increased tax rates and regulations across the country, but the battle in Illinois will test that. That is because industry-leaders DraftKings and FanDuel are the most affected by the proposal. The rest of the state’s online sportsbooks will see only small hikes, which could allow them a new avenue to capture market share.

With new sportsbooks such as ESPN Bet and Fanatics scrambling to grow their user base, they could choose to break from FanDuel and DraftKings. The amount of money invested in their platforms has not had mixed results as they struggle to compete in markets across the country. The ability to offer better odds and promotions in Illinois could help them close that gap, motivating them to abandon the alliance.

While this battle only concerns the Illinois market, the proposal could inspire other states to follow suit.