Illinois Increases Tax on Sportsbook Revenues Again

Illinois lawmakers have explored a unique way to implement an increased tax on the sportsbooks that operate in the Land of Lincoln. The increase will come in the form of a per-bet tax that will be levied on the total volume of bets in addition to the tiered-revenue tax currently implemented. 

Handle Tax 

The sportsbooks’ handle, another way of saying the total dollar volume of bets wagered, will be getting taxed effectively on July 1st, in addition to the tax on revenues all sportsbooks are currently paying. Tennessee is the only other state to impose a tax on a sportsbook’s handle; however, Illinois is now the only state that levies a tax on both the handle and the revenues generated. 

The tax will be more severe on the more popular sportsbooks like FanDuel and DraftKings, as it will include a tax of 25 cents per wager for the first 20 million bets taken in Illinois and then 50 cents per wager after that. 

This is in addition to a tax hike passed last year that took aim at the major sports betting platforms by implementing a tiered structure that increased the 15% on adjusted gross revenues to 20% on annual revenue below $30 million, 25% for revenue up to $50 million, 30% for up to $100 million, 35% for up to $200 million, and 40% for more than $200 million. 

At the time, Citizens JMP Securities analyst Jordan Bender wrote, “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.” 

Customers Pay the Freight 

Whenever a tax increase is imposed, it is always the end user who ultimately winds up picking up the tab, and this new increase is no different. Illinois sports bettors can expect far fewer odds boosts and no-sweat bets, while bonuses will be few and far between. Odds and point spreads will also be negatively affected as the sportsbooks attempt to claw back that hit to their bottom lines. 

It is estimated FanDuel will suffer a $77 million loss because of the handle tax, while DraftKings will sustain a $68 million loss per year. 

Naturally, this news was not welcomed by the sportsbooks or the Sports Betting Alliance, comprised of FanDuel, DraftKings, BetMGM, and Fanatics, which 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.” 

The statement also added that the increase was “discriminatory, punitive, and constitutionally suspect.”