Chicago Budget Proposal Includes Additional Taxes on Online Sportsbooks

An additional tax on mobile sportsbooks taking wagers in Chicago could become a reality on January 1st if the current budget proposal is not amended, which could mean that up to five sportsbooks could close their virtual doors in the Windy City.

A Taxing Issue for Sportsbooks

Illinois has not been a hospitable, tax-friendly environment for mobile sportsbooks operating in the state. Originally, a reasonable 15% tax on revenue was implemented, but that did not last long as the legislature increased that tax rate to 20% to 40%, depending on revenue.

And this year, the Illinois legislators added a per-bet tax of 25 cents on a volume of under 20 million bets and 50 cents per transaction on volumes of over 20 million.

This was not well received by the sports betting platforms, of which many passed the tax along to their customers, while others increased their minimum wager amount to combat the higher tax levy.

But now, the state’s largest city, Chicago, has gone rogue and has decided to institute its own city tax on sports bets of 10.25%, which would be over and above the 2% that sportsbooks must pay to Cook County, not to mention the onerous state taxes described previously.

The Chicago Financial Future Task Force, created by Mayor Brandon Johnson, has been tasked with solving the city’s $1.1 billion deficit by creating new revenue streams, and taxing sportsbooks is one of their ideas.

Industry Backlash

Naturally, this idea has caused angst among the sportsbooks that operate in Illinois and, by default, Chicago. Should the city follow through with this mobile sports betting tax, it could cause five major sportsbooks, including bet365, BetMGM, DraftKings, Fanatics, and FanDuel, to shutter operations in the city.

Sports Betting Alliance (SBA) Chairman Jeremy Kudon wrote in a letter to Mayor Johnson, “Online sports wagering operators are highly regulated entities that cannot lawfully operate without all required licenses. Absent published standards and a functioning application and issuance process, operators cannot continue to legally conduct business in the City.”

Besides the additional taxes, Chicago does not have licenses for sports betting, and by taxing them without awarding licenses, the sportsbooks may run afoul of other state laws that require them to be licensed in every jurisdiction in which they pay taxes.

Therefore, should the budget pass with the sports betting tax included, it would likely take months for the formation of a committee to award licenses, which would mean the tax would likely be delayed so the mobile sportsbooks could operate without breaching laws in other states due to a perceived violation in Chicago.

Yet, the SBA would like to see the tax scrapped altogether.