Surprise Illinois Sports-Betting Tax Stuns Industry

June 3, 2025
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New legislation suddenly passed over the weekend by Illinois lawmakers to implement an unprecedented new per-wager tax on online sports betting leaves market-leaders FanDuel and DraftKings in a tricky situation as they ponder how to react.
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New legislation suddenly passed over the weekend by Illinois lawmakers to implement an unprecedented new per-wager tax on online sports betting leaves market-leaders FanDuel and DraftKings in a tricky situation as they ponder how to react.

Both chambers of the Illinois General Assembly voted to approve House Bill 2755 late Saturday night as part of the legislature’s typical down-to-the-wire negotiations over the state budget for the forthcoming fiscal year.

The bill contains a unique provision that will tax sports-betting operators an additional 25 cents on every online sports wager up to the first 20m wagers accepted annually, with any wager beyond that threshold being taxed at 50 cents per bet.

The flat per-wager tax is the first of its kind in any U.S. jurisdiction, and appears to be equally without precedent internationally, according to Vixio GamblingCompliance research.

One state, Tennessee, taxes on a percentage of wagering handle instead of gross wagering revenue, and all regulated operators pay a 0.25 percent federal excise tax on betting handle.

The move came as a shock to many in the industry, as details of the bill were only released Saturday night around 7pm, just four hours before both chambers of the legislature voted to approve it.

Two prominent gaming industry lobbyists told Vixio that they first learned of the provision less than 24 hours before the bill was ultimately voted on and approved Saturday night. 

“There's a bit of an unfairness there that a policy so sweeping like this can just literally be foisted upon the industry without any ability to explain or create some sort of a game plan to defeat it,” one source told Vixio.

The suddenness of the plan's rollout was evident on Saturday (May 31) as the Sports Betting Alliance (SBA), which lobbies behalf of FanDuel, DraftKings, BetMGM and Fanatics, launched an all-out offensive urging Illinois bettors to urgently contact state legislators in an effort to kill the provision.

The group also enlisted prominent influencers such as former NFL star Rob Gronkowski and Barstool Sports personalities to rally players on their behalf throughout the day.

The move is the second straight year that Illinois lawmakers have turned to sports-betting tax increases to balance the budget, and in both instances, the efforts have disproportionately affected the two U.S. market-leaders.

Last year, the state implemented a new graduated tax rate that taxed the highest grossing sportsbook operators up to 40 percent based on revenue thresholds.

In this instance, FanDuel and DraftKings are the only two operators in the state that have accepted more than 20m annual wagers in the last 12 months based on Illinois Gaming Board data analyzed by Vixio.

If the tax was in place for the 12 months through the end of March, each company would have paid more than $67m in additional taxes, bringing their effective tax rate for the year to nearly 50 percent of total revenues.

“Make no mistake, this discriminatory, punitive and constitutionally suspect tax increase on legal sportsbooks who have invested more than a billion dollars in the state will be destabilizing for regulated sports betting in Illinois,” the SBA said in a statement.

“A per-bet tax most penalizes small recreational bettors — many of whom are betting a single dollar or two. Under this legislation, these popular bets will get hit with a massive 25 percent or 50 percent tax.”

The SBA added that the group will continue to push back against the tax, both in Illinois and any other state that may consider borrowing the new concept for themselves.

 In the short term, however, the question turns to how FanDuel and DraftKings will respond.

Both companies saw hits to their stock price on Monday following the news, with DraftKings' stock taking a nearly 6 percent dip having at one stage being down nearly 9 percent, and FanDuel parent Flutter Entertainment taking a 2.7 percent hit. 

In a note to investors, Barry Jonas, an analyst for Truist Securities, suggested several potential remedies the companies could take to mitigate the new charge.

One option Jonas cited would be to impose a higher minimum bet stake, although he noted that the optics of such a move would be “likely poor”.

Another would be reviving the previously abandoned plan by DraftKings to subtract a surcharge from winning players. 

The company had announced plans in August 2024 to subtract a small amount from winning bets in high-tax states, including Illinois, but DraftKings scrapped the plan after backlash from players and regulators, and after none of its competitors followed suit with a surcharge plan of their own.

A third route, per Jonas, would be for the two rival companies to enter the federally-regulated prediction markets space as a means to avoid the onerous state tax.

“While controversial, [it would] offer operators, for now, the chance to sidestep taxation entirely,” Jonas wrote.

Still, although these methods would mitigate the losses for the two companies, they likely would not serve as a deterrent for future state tax increases, and whether the companies would consider the drastic step of exiting a high-tax, but high-revenue jurisdiction such as Illinois or New York, where operators have lobbied to reduce the state’s 51 percent tax since virtually the day sports betting launched in the state, is an open question.

“I think that's becoming more realistic in these high-tax states,” a gaming industry source said of the prospect of DraftKings or FanDuel withdrawing. “Nobody wants to leave a market because no one wants to give up market-share and give up customers, but at some point they're going to have to say, well, at what cost can we continue to do business here and now we have to really directly pass those costs onto the consumer?”

The Illinois budget bill still requires Governor J.B. Pritzker’s signature to become law, with the new sports-betting tax taking effect on July 1, but Pritzer has already stated publicly that he will sign the legislation.

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