Chicago Proposes Per Bet Tax, Mirroring State Fees

In an effort to raise funds to narrow the city budget deficit, Chicago lawmakers are openly discussing implementing their own per-bet fee, which would follow a similar pattern imposed by the state.

Pay to Play

The Illinois legislature has been aggressive in hiking its taxes on mobile sports betting revenues and doubled down over the summer by imposing a per-bet fee ranging from 25 cents to 50 cents per transaction. Any sportsbook that takes under 20 million individual bets would be subject to a 25-cent per bet fee, while any wagers numbering more than 20 million would be taxed at 50 cents per bet.

Chicago politicians are searching for ways to reduce the city’s forecasted $1.1 billion deficit and are turning their attention to the sportsbooks operating in the state. A recent proposal would have any wagers taken in the city of Chicago be subject to the same per-bet fee schedule, and that is causing panic among the sports betting platforms.

Sportsbooks Respond

The mobile sportsbooks have already reacted to the state’s recent per-bet fee, with FanDuel and DraftKings passing the fee along to their customers, while smaller sportsbooks have implemented a 25-cent per-bet fee and increased their betting minimums. Most sportsbooks have agreed to rescind the fee should the state do the same.

The Chicago Financial Future Task Force, created by Mayor Brandon Johnson, has been tasked with finding new ways to increase revenue for the city, which has prompted the group to consider a per-bet fee, which would reportedly raise an additional $17 million for the city.

Online Betting Dominates

The vast majority of sports wagering occurs digitally, with retail sportsbooks taking a small fraction of the wagers. It just so happens that Chicago taxes retail facilities within its borders, but not mobile bets.

“Currently, the City taxes sports wagering at physical sports wagering facilities, where only 2% of all sports betting occurs,” the task force said in its interim report. “The remaining 98% of sports betting occurs online and remains untaxed.”

Backlash

Naturally, news of more taxes did not sit well with the sports betting companies, nor the Sports Betting Alliance (SBA), an industry trade group comprised of sports betting powerhouses bet365, BetMGM, DraftKings, Fanatics, and FanDuel.

“Illinois residents have voiced their opposition to the state’s per-wager tax, sending over 100,000 contacts to their lawmakers to date and flooding social media with angst over the tax,” the SBA said. “The Mayor and City Council should not double down on this bad idea in Chicago.”

Revenue Impact of the New Per-Bet Fee

The state’s new per-bet fee garnered $5.2 million in July, the first month in which it was imposed, according to the Illinois Gaming Board. That additional revenue planted the seed in Chicago’s proposed budget for additional capital.

However, the long-term effects on the sports betting industry in Illinois are still unknown, but the SBA has stated that more than 50% of the bets in the Land of Lincoln are $5 or under, meaning a new fee could chase small bettors out of the market for good.

“Unregulated, offshore operators offer cheaper sports betting alternatives for consumers, without any protections – including age verification – and without any oversight, not to mention no tax revenue whatsoever,” the SBA said.