The Sports Betting Alliance, a coalition representing BetMGM, DraftKings, FanDuel, and Fanatics Sportsbook, is warning customers that a proposed tax rate increase in the state will seriously affect how they participate in sports betting.
If a proposed sports betting tax rate increase to 35%, up from 15%, in Gov. J.B. Pritzker s (D) state budget is approved, customers will be hit with fewer promotions and worse odds from operators that are already struggling in the state, a Sports Betting Alliance spokesperson told Sports Betting Dime.
The alliance has been encouraging Illinois sports betting customers to reach out to their constituents to oppose the bill. More than 35,000 emails have been sent in opposition so far, said Nathan Click, Sports Betting Alliance spokesperson.
Pritzker Wants More Sports Betting Tax Revenue
Pritzker s budget proposal included a sports betting tax increase to 35% from 15%, which estimates an additional $200 million in annual sports betting tax revenue. If approved, the new rate would go into effect on July 1, 2024.
Illinois generated $161.4 million in sports betting tax revenues in 2023 at its current 15% tax rate.
If approved, Illinois would be one of the highest taxed states for sports betting in the country. New York currently sits at the highest rate at 51%, with Pennsylvania next at 36%. Delaware, New Hampshire, and Rhode Island also have the same or higher rates than Pennsylvania, but they have limited markets with only one or two operators.
Even with just a 15% tax rate, operators right now in Illinois are operating in the red, Sports Betting Alliance spokesperson Nathan Click told Sports Betting Dime. When entering the market sports betting companies believed they would be operating at a 15% rate, and increasing the rate by 133% will absolutely affect offerings in the state, he said.
From the consumer side, a 133% tax rate increase will mean worse odds and few, if any, promotions. It means less left for companies to invest in technology upgrades, responsible gaming efforts and their customer support teams. It’s also a subsidy to bookies and illegal market: Legal operators have just started to make serious inroads into Illinois’ robust illegal sports betting market. Worse odds, no promotions, worse product all give the offshore illegal market apps (who pay no tax) a massive leg up when competing for customers, he said.
A more prudent way to increase gaming tax revenue in the state, Click said, would be for Illinois lawmakers to legalize iGaming in the state.
An increase in the sports betting tax rate will drive customers to illegal offshore operators, he said, while the legalization of iGaming is estimated to generate more than $750 million in additional tax revenue each year.
Sports betting in Illinois is already taxed at a higher rate than Michigan (10%), Iowa (6.75%), or Indiana (9.5%). A tax rate increase will likely drive all but the top three sportsbooks out of the state. That’s bad for customers and ultimately bad for Illinois, he said.
Illinois Latest State to Explore Tax Rate Increase
As Illinois lawmakers are considering a tax rate increase, one of the most robust markets in the country is also exploring a potential increase to their gaming tax rates.
New Jersey Sen. John F. McKeon (D-27) introduced in April, which aims to increase both the state’s sports betting and iGaming tax rates to 30% of gross gaming revenue. The state’s sports betting tax rate is currently at 13% and its iGaming rate is 15%.
If , New Jersey would be among the highest taxed states in the country for sports betting and iGaming.
In 2023, New Jersey brought in $125.57 million in online sports betting tax revenue at a 13% tax rate. If the rate had been 30%, the state would have taken in $289.8 million in tax revenue for the year. For iGaming, the Garden State reported $288.48 million in tax revenues at a 15% rate. At a 30% rate, New Jersey would have taken in nearly $577 million in iGaming revenues for the year.
The most recent state to actually approve an increase in its sports betting tax rate was Ohio in July 2023. Buckeye State lawmakers doubled the sports betting tax rate from 10% to 20% last June, which went into effect a month later in July, just six months after launching sports betting in January 2023.
Gov. Mike DeWine (D) suggested doubling the tax rate in February 2023, just one month after launch. In April, the Ohio House of Representatives approved their own version of the state’s budget that did not include the increase. The Senate the House version of the budget and included the tax rate hike.
In the end, the House and Senate agreed to the new state fiscal year 2024-2025 budget in June, which included the increase of the Ohio sports betting tax rate from 10% to 20%.
Through its first five months, Ohio generated more than $507.08 million in taxable revenue, which translated to more than $50.7 million in tax revenue at its 10% sports betting tax rate. At a 20% tax rate, that figure would have doubled to $101.4 million in taxes for Ohio.
