Illinois Senate Approves a Progressive Sports Betting Tax Increase

Illinois Senate Approves a Progressive Sports Betting Tax IncreaseSportsbook owners in Illinois just took a blow as the Illinois Senate Approves a Progressive Sports Betting Tax Increase. Last Sunday, the Illinois State Senate gave their approval for the 2025 budget. One provision is the budget includes raising the state’s sports betting tax. However, the tax was in the form of a progressive tax rate for operators based on their revenue.

This tax would impose a 40% rate on operators with the highest adjusted gross revenue. HB 4951 aims to significantly increase the tax rate for the most successful sportsbooks in Illinois. Furthermore, it would make them the second-highest tax rate in the country after New York’s 51% rate.

Previously, sports betting operators in Illinois paid a 15% tax. However, earlier this year, Governor J.B. Pritzker earlier made a proposal to increase it to 35%. Afterwards, the Senate version of the budget was an even bigger increase by raising the maximum tax rate to 40%.

One interesting part of the amendment is how the sports betting tax distinguishes the AGR between retail and online sportsbooks. If an operator opens an online sportsbook and a retail sportsbook the tax will be different for each. This is because it would pay separate taxes for each on the same sliding scale under the new system.

Illinois Senate Approves Progressive Sports Betting Tax Increase – What Happens Now?

While HB 4951 did get the approval of the Illinois Senate, it remains to be seen whether it will become a law. However, if it does become a law, here is what will take place in July of 2025.

The rates paid under a progressive tax system will be on a sliding scale, which is broken down like this:

  • AGR up to $30 million would be taxed at 20%
  • AGR from $30 million to $50 million would be taxed at 25%
  • AGR from $50 million to $100 million would be taxed at 30%
  • AGR from $100 million to $200 million would be taxed at 35%
  • AGR above $200 million would be taxed at 40%

Now, the revised version approved by the Senate will be returned to the House for re-endorsement. It is anticipated to be approved without any additional modifications and is scheduled to take effect on July 1st.

If Pritzker ratifies and signs it into law, Illinois will make history. This is because it will be the first state to implement a completely progressive sports betting tax rate.

In the month of March alone, sports bettors in Illinois placed wagers exceeding $1.2 billion. Furthermore, the state’s operators generated revenue surpassing $1 billion in 2023. If we take these numbers and apply the progressive sports betting tax, it would significantly increase revenue in Illinois. It would have resulted in an additional $175 million in tax revenue in comparison to the existing 15% rate.

DraftKings and FanDuel Stocks Took a Hit Today

Even though, HB 4951 has not yet become a law, some sportsbooks are already feeling its effects. Flutter Entertainment, the parent company of DraftKings and FanDuel, experienced a decline in stock prices on Tuesday. This took place following the approval of a new budget by Illinois senators. Specifically, about the tax increase specifically targeting sports betting operators.

According to iGaming News sites, this tax hike would position Illinois as the second most costly state for online sports gambling companies to conduct their operations, with New York taking the lead. The tax rate would be determined on a progressive scale, with companies generating the highest adjusted gross revenue being subject to a 40% tax.

Since that DraftKings and Flutter are largest sports betting companies, the tax rate would have a significant impact on them. On the other hand, smaller operators like Penn Entertainment would be comparatively less affected.

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