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As New York continues to fill its coffers with tax revenue from mobile sports betting, the governor of the United States' second-largest market is now proposing to more than double Illinois’ tax rate to help balance the state budget.
In an executive budget proposal released on Wednesday (February 21), Illinois Governor J.B. Pritzker called for the state’s tax rate on sports wagering to be raised from 15 percent to 35 percent for the 2025 fiscal year beginning July 1.
Pritzker, a Democrat, did not address the proposed tax hike in his budget address to lawmakers in Springfield.
However, accompanying budget documents said that the increase “would bring Illinois’ tax rate closer to peer states’ tax structures.”
Illinois generated an estimated $162m in total tax revenue last year from a sports wagering market that was worth slightly more than $1bn in gross revenue.
New York, in contrast, raised $862m in taxes based on the 51 percent rate it applies to mobile sports-betting operators who generated nearly $1.7bn in revenue. Illinois was the second biggest U.S. market for mobile sports wagering in 2023 and the third largest overall, reporting essentially the same total revenue from land-based and online sports betting as New Jersey.
Pritzker’s executive budget estimates that an increase in the state tax rate to 35 percent would generate an estimated $200m in additional revenue for the next fiscal year. Those proceeds would be allocated to Illinois’ General Fund.
In his budget address, Pritzker acknowledged having to make some “hard choices” to maintain a balanced budget, but he indicated a willingness to compromise with lawmakers as the state’s General Assembly now prepares to review the governor’s proposal and ultimately approve a new budget law.
The Illinois Casino Gaming Association did not immediately reply to a request to comment on the governor’s proposal.
But a coalition of leading sports-betting operators said that a tax hike to 35 percent would be counter-productive and called for Pritzker and the Illinois legislature to instead expand the state’s online gambling market through the addition of iGaming.
At least three bills to authorize online casinos remain pending in the Illinois House and Senate, although legislation faces fierce and potentially insurmountable opposition in the shape of operators of lucrative video gaming terminals (VGTs) in Illinois bars and taverns who have voiced concerns about cannibalization.
“Legalizing iGaming in Illinois would create much more revenue than raising sports betting taxes, and all without harming the health of the legal sports betting market and casinos,” said Nathan Click, a spokesperson for the Sports Betting Alliance, which represents FanDuel, DraftKings, BetMGM and Fanatics.
A regulated iGaming market in Illinois would generate an estimated $775m in annual tax revenue, or more than triple the revenue increase being forecasted through Pritzker’s proposed tax hike, Click told Vixio GamblingCompliance.
“Meanwhile, raising taxes on sports betting will allow illegal offshore sports operators to provide better odds and a competitive advantage over law-abiding sportsbooks, crowd out smaller, startup and minority-owned operators and their business partners, and threaten the long-term health and tax revenue generated by the legal market.”
It should be noted that Illinois has a history of raising the tax rates applied to its land-based casinos in times of fiscal need, while the state also would not be the first to increase taxes on sports betting.
Ohio last year approved a budget law that doubled the state’s tax sports wagering tax rate from 10 to 20 percent of gross revenue, barely six months after the market was launched. Ohio’s governor insisted, however, that the move was made in response to the aggressive marketing practices of operators rather than strictly to raise more revenue for the state.
Tennessee also approved legislation last year to pivot from a 20 percent tax on revenue to a tax of 1.85 percent on wagering handle, although again lawmakers insisted the change was not designed to be a revenue-raising initiative.
A 35 percent tax rate would be the second highest in a competitive U.S. market after New York, according to Vixio research, given that the 36 percent rate in Pennsylvania is applied after deductions of bonuses and promotions that are not currently allowed in Illinois.
On top of its 15 percent state tax rate, Illinois also applies an additional 2 percent local tax on wagers that are initiated in Cook County, which includes Chicago.
