Share 
Chicago’s latest budget drama is spilling well beyond City Hall, pulling sportsbooks, state lawmakers, and bettors into a fast-moving tug-of-war over who gets to tax sports wagering — and how far that power should go.
The city’s newly adopted $16.6 billion budget includes a sharp increase in sports betting taxes. What began as a local revenue strategy has quickly become a broader political clash that could reshape how gambling taxes are collected across Illinois.
Sports betting tax puts pressure on operators
Under the budget ordinance, Chicago imposes a 10.25% tax on adjusted gross sports wagering receipts tied to bets placed within city limits. The tax applies to wagers made at physical sportsbooks as well as online or mobile bets when the bettor is located inside Chicago. City officials estimate the measure could generate at least $26 million annually.
Layered on top of existing state and local taxes, the total effective tax rate on Chicago-based sports betting revenue would rise to roughly 32.25%. Operators quickly raised concerns, noting Illinois already has one of the nation’s most aggressive sports betting tax structures, including progressive rates and a per-wager fee on mobile bets.
Some sportsbooks have responded by shifting costs to customers. DraftKings previously introduced a transaction fee on Illinois wagers, citing the rising cost of doing business in the state. Chicago’s new levy adds another layer of pressure in a market where margins are already tightening.
Policy moves forward amid legal and regulatory uncertainty
Mayor Brandon Johnson took an unusual stance on the budget ordinance, announcing he would neither sign nor veto it, allowing the measure to take effect automatically. City leaders have framed the tax as a necessary revenue measure, while critics argue it risks destabilizing a legal market that took years to build.
Industry opposition has focused not only on the tax rate but also on regulatory uncertainty. The Sports Betting Alliance, which represents major online sportsbooks, warned that the ordinance introduces a city-level licensing requirement without clearly explaining how online sportsbooks should comply.
Those concerns escalated into legal action in late December, when a coalition of sportsbooks — including DraftKings, FanDuel, BetMGM and others — filed a lawsuit challenging Chicago’s authority to impose the tax and licensing rules. The group argued that Illinois law grants the state exclusive authority over online sports betting regulation and taxation.
While the lawsuit remains active, sportsbooks have continued operating inside Chicago. The city issued local licenses to major operators ahead of the tax’s Jan. 1, 2026, effective date, prompting the alliance to withdraw a request for a temporary restraining order that could have disrupted betting activity. Operators remain live as the legal challenge moves forward.
Springfield pushes back against Chicago’s new gambling tax
As Chicago’s tax neared implementation, lawmakers in Springfield entered the dispute. State Sen. Patrick Joyce filed SB 2760, legislation designed to neutralize the city’s tax without directly overturning it.
The bill would reduce Chicago’s share of the Local Government Distributive Fund by the amount the city collects from sports betting taxes, redistributing that revenue to other municipalities and counties across Illinois. Rather than banning the tax outright, the proposal removes its financial upside, effectively turning Chicago’s move into a zero-sum outcome at the state level.
What’s next for Chicago’s sports betting tax
The Illinois General Assembly reconvenes in mid-January 2026, meaning Chicago’s tax could already be live when lawmakers debate how to respond. That timing raises the likelihood of retroactive fixes, prolonged legal challenges, or broader changes to how much authority local governments have over gambling policy.
House Gaming Committee Chair Daniel Didech has also floated legislation that would bar local governments from taxing or regulating gambling under home-rule authority.
Between pending lawsuits, revenue-offset legislation, and mounting industry pressure, Chicago’s sports betting tax has become more than a budget line item — it now stands as a test case of how far local power in an industry already straining under layered taxation and regulation.
