Illinois Senate Passes Controversial Progressive Sports Betting Tax

The Illinois Senate has approved a debated tax on sports betting.

The Illinois Senate has approved a new tax on sports betting that will have a big effect on companies offering these services in the state.

Tax Rates and Structure

Tax rates differ depending on the adjusted gross revenue (AGR) for both retail and online sportsbooks. The new rates are:

• 20% tax on AGR up to $30 million
• 25% on AGR of revenue between $30 million-$50 million
• 30% on AGR of revenue between $50 million-$100 million
• 35% on AGR of revenue between $100 million-$200 million
• 40% on AGR over $200 million

Operators will pay different taxes for retail and online revenue.

Impact on Operators

Different companies face different tax rates. DraftKings has to pay a 20% tax on its in-person earnings and a 40% tax on its online earnings. Rush Street pays 20% on its in-person earnings and 30% on its online earnings.

Operators have been paying a 15% tax since June 2021, but the new tax rates are significantly higher.

The Sports Betting Alliance responded to the situation.

The Sports Betting Alliance (SBA) is upset about the new tax. They believe it will hurt the sports betting market in Illinois.

SBA member companies, such as BetMGM and FanDuel, gathered 55,000 people from Illinois to oppose the tax increase. They claim that the higher taxes will result in poorer products and promotions for customers.

Jeremy Kudon, a lobbyist for the SBA, tweeted that the tax increase hurts businesses that have put money into Illinois. He also said it could result in less investment in the state.

Comparison to Other States

If passed into law, Illinois will have the second-highest sports betting tax rate in the U.S., at 51%, just behind New York. This high rate might make it difficult for betting companies to make a profit in the state.

Illinois will be the first big state in the U.S. to have a tax on sports betting that increases with higher earnings. Arkansas taxes sports betting similarly, but it counts sports betting revenue as part of total casino revenue.

Next Steps

The bill, HB 4951, goes back to the House for approval. The original House version did not include the progressive rates. The House will examine and decide on the changes made by the Senate.

People are paying close attention to see what happens. The changes might start soon and could affect sports betting in Illinois.