For the second consecutive year, Illinois mobile sportsbooks will face a hit to their bottom line due to increased state taxes. However, this year, the legislature voted to implement a per-bet fee, the first of its kind in the nation.
Per Bet Tax
Tennessee is the only state to tax a sportsbook’s handle rather than its adjusted gross revenue, but Illinois is the first state to do both, last year increasing the tax rate from a standard 15% to a tiered structure that begins at 20% and can increase to as high as 40% depending on the revenue volume.
But this year, the legislature decided that the increase still wasn’t enough and decided to implement a per-bet fee, essentially a tax on the handle in a roundabout way, that begins at 25 cents per bet for the first 20 million wagers and increases to 50 cents per bet over that amount beginning on July 1, 2025.
The sports betting industry was not happy about this most recent news, and the Sports Betting Alliance, comprised of FanDuel, DraftKings, BetMGM, and Fanatics, released the following statement:
“For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million-plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market.”
Passing It On
Naturally, the biggest sportsbooks will bear the brunt of this tax, as they also did in the tiered system implemented last year by being categorized in a higher tax bracket. However, the largest sportsbook in the nation, FanDuel, decided it had had enough and announced they were passing the per-bet fee onto the customer, beginning at 50 cents per bet.
This means FanDuel will make 25 cents per bet for the first 20 million wagers, as they are only being assessed at 25 cents, only paying 50 cents once they take over 20 million wagers. Boston-based DraftKings, the nation’s second-largest sportsbook, followed suit a few days later and also implemented the 50-cent-per-bet charge. Fanatics has recently announced they, too, will charge a per-bet fee, but theirs will only be 25 cents.
Illinois now holds the distinction of being the most expensive state to do business for a mobile sportsbook. Depending on a sportsbook’s revenue and volume, Illinois’ tax can be as high as 60% for sportsbook operators, which surpasses New Hampshire, New York, and Rhode Island’s 51% tax on adjusted gross revenues.
Citizens JMP Securities analyst Jordan Bender wrote last year, “The graduated structure [in Illinois] changes that equation where the top companies can’t structurally gain a strategic foothold in tougher regulatory environments, creating a more even playing field when it comes to the tax environment. In terms of market size, we would expect growth to be impaired by the lack of investment.”
That was the deleterious effect Bender wrote about last year, but now the tax burden is even steeper, and many believe that the onerous tax will backfire on the state, causing people to seek out other gambling options to avoid paying the per-bet fee with the biggest sportsbooks. We should also note that the odds, bonuses, and promotions are expected to be adversely affected, as sportsbooks will want to save that money to maintain their bottom lines.
FanDuel and DraftKings have publicly stated they will remove their 50-cent per-bet fee only if the state repeals its own.
