Sports Betting Alliance blames Illinois tax hike for drop in gambling

Dig Deeper

Related stories

2025/11/18: Illinois sports bets fall after betting tax, but amount wagered hits new high 2025/06/04: Illinois raises sports betting tax as part of the 2026 budget 2025/04/30: Louisiana lawmakers discuss tax hike for sports betting operators 2025/07/04: Gamblers share concern over tax hike in US budget bill

The Backstory

Illinois’ tax pivot set the stage

Illinois reshaped its sports betting market with a rapid series of tax changes that culminated in a per-wager surcharge tucked into the fiscal 2026 budget. In a minutes-before-midnight budget vote, lawmakers approved charging licensed operators 25 cents on each of the first 20 million annual bets and 50 cents per wager beyond that threshold, part of a broader plan to raise $1 billion for public transit within a $55.2 billion spending package. That levy arrived on top of a tiered rate increase enacted in 2024 that pushed effective tax rates above 30 percent for leading online sportsbooks.

Operators warned at the time that layering a per-bet charge over high revenue taxes would narrow margins, force product changes and ultimately filter through to consumers. Major brands and their media allies tried to rally opposition, with industry figures and personalities amplifying concerns that the move would backfire by raising costs and nudging customers toward offshore books. The Sports Betting Alliance, whose members include FanDuel, DraftKings, BetMGM and Fanatics, promised to contest what it called a harmful policy shift and said it would keep fighting similar ideas in other states, as detailed in post-vote reaction.

Chicago’s separate push complicated the outlook further. City leaders advanced a 10.25 percent local tax on sports betting revenue effective at the start of the year, while state lawmakers weighed a preemption bill to block municipalities from imposing their own levies. That split between city hall and Springfield left operators navigating overlapping proposals even before the state’s new per-bet charge took effect.

Data flashed warning signs

The first full month under the new levy delivered a mixed signal: fewer bets, but more money risked per ticket. According to an analysis of Illinois Gaming Board figures, the state recorded about five million fewer wagers in September compared with the prior year, even as total handle rose 9 percent to a record $1.4 billion. The average bet size climbed 28 percent to $46.44, suggesting casual and low-dollar players may have pulled back while higher-stakes bettors continued to participate. That dynamic was outlined in reporting on the September numbers.

The pattern is consistent with how per-transaction fees can reshape behavior. When operators face a cost on each bet, they may respond with higher minimums, fewer micro-betting options or increased fees on deposits and withdrawals. Those changes can discourage small wagers and raise the effective price of betting. Illinois’ results, showing a smaller number of larger bets, point to that shift. The emerging trend also gave fresh ammunition to critics who warned that squeezing the regulated channel could send price-sensitive users back to illegal sites that do not charge taxes or fund responsible gambling programs.

Meanwhile, pressure mounted on Washington to help shut down offshore operators. As noted in the same September analysis, a bipartisan group of 50 state attorneys general urged federal action in August to curb unlicensed betting. Illinois’ evolving data has become part of that broader debate over how tax policy intersects with channelization to legal markets.

Chicago’s add-on tax and a preemption clash

Local taxes present a parallel risk. Chicago’s 10.25 percent levy arrived just as the state’s per-bet charge kicked in, prompting operators to weigh market-level economics and legal options. City leaders framed the add-on as a revenue tool with minimal downside given strong demand for sports gambling, but operators warned about cumulative impacts when layered on top of state taxes that had already climbed sharply since 2024. A state bill to bar local gambling taxes could upend Chicago’s approach, adding uncertainty for business planning and for bettors absorbing price changes. Those crosscurrents were flagged in coverage of the local-state conflict.

The policy collision in Illinois—state surcharge, city levy, and potential preemption—has become a case study for other jurisdictions weighing how far to push tax rates without undermining the legal market’s competitiveness. It is also a test of how quickly bettors react to changes in pricing and product availability.

Pushback spreads beyond Illinois

The tax debate is not confined to one state. In Louisiana, lawmakers advanced a plan to more than double the sports betting tax to 32.5 percent, aligning it with video poker and earmarking proceeds for addiction services and college athletics. The measure, described in House Bill 639 coverage, would channel surplus revenue into a fund for NCAA Division I programs across the state, with tens of millions of dollars projected. Operators there argued that the current 15 percent rate already sits above the national average and warned of similar market effects: thinner margins, reduced promotional spend and potential contraction among smaller books.

At the federal level, a separate tax issue raised alarms among gamblers themselves. A provision in a recently passed budget package would cap loss deductions at 90 percent when offsetting winnings, a change that professionals and frequent players say could penalize break-even results and distort taxable income. Industry stakeholders told Bloomberg the change could “eat into” profits and drive behavior changes. The stakes are outlined in reporting on gamblers’ concerns about the U.S. budget bill, which also noted potential corporate tax breaks that could benefit casinos and gaming suppliers.

A global tilt toward higher levies

The U.S. is not alone. Brazil is moving to raise contributions on fixed-odds betting operators as part of a broader fiscal plan, with rates climbing from 12 percent of gross gaming revenue to 15 percent in 2026–27 and 18 percent in 2028. The bill also tightens anti-money laundering duties and creates a compliance index for betting firms. These measures, approved by the Senate Economic Affairs Commission and now headed to the Chamber of Deputies, reflect a growing preference among policymakers to trade higher tax takes for stricter oversight. The details are in coverage of Brazil’s tax proposal.

For Illinois, that global context underscores the stakes. States and countries are testing the elasticity of regulated wagering—how much tax and compliance cost the market can tolerate before legal operators pull back and consumers shift behavior. Illinois’ early returns show handle can remain strong even as bet counts fall, but sustained declines in participation would raise questions about long-run revenue, responsible gambling funding and the ability to displace offshore sites. As other jurisdictions watch, Illinois has become a bellwether for where policy meets consumer choice.