Home » No deal yet: Illinois lawmakers consider step-up wagering tax rate that would punish biggest operators

No deal yet: Illinois lawmakers consider step-up wagering tax rate that would punish biggest operators

With the biggest sports betting operators reportedly threatening to leave the state over the latest proposed tax-increase plan, the Illinois general assembly adjourned for the weekend at about 10 p.m. local time Saturday (25 May). It plans to reconvene and continue work on the budget “next week.”

The latest budget proposal Saturday afternoon included a graduated wagering tax structure that would set rates between 20-40%, depending on an operator’s gross gaming revenue (GGR).

Those with GGR of $30m per year or less would be taxed at 20% while those with GGR of $200m or more would be taxed at 40%.

Here’s a look at the proposed breakdown:
20% tax on GGR up to $30m

25% on GGR on revenue over $30m-$50m

30% on GGR on revenue over $50m-$100m

35% on GGR on revenue over $100m-$200m

40% on GGR on revenue over $200m

Top operators would see taxes nearly triple

Companies like DraftKings and FanDuel, the biggest operators in Illinois, would easily fall in the 40% tax category, based on GGR from previous years.

Smaller operators, like Circa Sports, would likely fall into the 20% tax category. Most other operators in Illinois would fall somewhere in between.

At 40%, Illinois would be the second-most expensive competitive market to do business in.

New York has a 51% tax rate, and operators there are struggling to profit. The top tier of the tax on the proposed sliding scale is higher than the 35% rate Governor JB Pritkzer initially proposed. Major operators have been lobbying against Pritzker’s proposed increase for weeks.

“The notion that you would punish the operators who invest the most and create the most jobs in the state is totally backwards,” an industry source who wished to be unnamed told iGB. “Policymakers should be incentivizing operators to create jobs and invest resources on building the Illinois market. This does just the opposite.”

Pritzker’s proposal was for a flat tax rate that would more than double the current 15% tax rate. Sources said Saturday that the flat tax idea was back on the table. It seems likely there will be an increase, the question is how much.

Should Pritzker succeed in getting the increase, he would be the second governor in a legal sports betting state to do so. At the behest of Governor Mike DeWine, Ohio legislators last July doubled the wagering tax from 10% to 20%.

Other states weigh raising rates

Lawmakers in multiple states have considered wagering tax increases over the last year. But so far, only Ohio lawmakers have taken action.

Massachusetts lawmakers last week shot down a proposal to increase the tax rate there from 20% to 51%.

A bill in New Jersey would increase the tax on digital wagering from 13% to 30% and on online gambling from 15% to 30%. The bill is still in committee.

Eight digital platforms are live in Illinois, and in 2023 generated $1.03bn in adjusted gross revenue. The state took in $151.4m in taxes.

Budget deadline is next month

Illinois lawmakers were scheduled to adjourn at the end of Friday (24 May), but agreed to extend the session in an effort to approve a budget. The legislature technically has until June 30 to pass a budget, but generally adjourns well before that.

According to NPR, if the budget is approved after May 31, the number of votes needed for approval increases.

According to a tweet from Capitol News Illinois reporter Hannah Maisel, media was given the following statement late Saturday:

“The House and Senate are very close to an agreement on a final budget. Procedurally, the earliest an agreement could pass both chambers is next week. To let members and staff rest and spend time with family, we are adjourning for the holiday weekend and will return to complete this work.”

Lawmakers did tackle several key issues late Friday and Saturday, advancing bills about abortion, maternal rights, carbon storage, and health insurance reform.