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On Wednesday, Governor of Illinois JB Pritzker (D) introduced a $52.7 billion budget proposal for the state’s forthcoming fiscal year, commencing on July 1.
This budget, he disclosed, is aimed at tackling pressing issues, including the migrant crisis, economic infrastructure, and advancing education. Hence, the proposal includes a plan to raise the tax rate on Illinois sports betting from 15% to 35%, which is over double what is being remitted, as this will result in $200 million from the old figure of $100 million.
“Our FY25 budget proposal makes some hard choices. I wish we had big surpluses to work with this year to take on every one of the very real challenges we face,” explained Gov. Pritzker.
Governor Pritzker’s role in legalizing sports betting in Illinois in 2019, along with a comprehensive gaming expansion bill, set the stage for a remarkable surge in the online sports betting landscape. Through a series of executive orders, Pritzker effectively removed barriers to retail registration, paving the way for explosive growth in the state’s sports wagering industry.
This move propelled Illinois into the ranks of the top three sports betting markets nationwide, trailing only behind powerhouse states like New York and New Jersey. Currently, in the Prairie State, both retail and online sports betting are thriving, with bettors collectively wagering a staggering $11.6 billion across the state’s 11 physical sportsbooks and eight digital platforms last year.
Bookmakers retained approximately $1 billion from these wagers, representing 8.6% of the total. As a result, Illinois saw a significant influx of revenue, with the state’s share of the gross gaming sportsbook revenue totaling around $150 million. With this in play, Governor Pritzker believes that Illinois should receive a larger portion of the revenue generated from this lucrative sector.
Tax Increase Likely to Distort Operations and Profits for IL Operators
While an increase in taxes would be good for the state’s development, this move could eat into the profits of major players in Illinois, such as DraftKings and FanDuel, who currently hold significant sway in the state’s gambling scene. However, it may also pose challenges for smaller operators like Circa Sports and BetRivers, potentially hampering their ability to thrive in the local market.
If Governor Pritzker were to implement this increase, he would follow in the footsteps of Ohio Governor Mike DeWine, who raised his state’s tax rate to 20% just last year. DeWine’s decision was seen by some as a response to public frustration with the incessant advertising seen on television and radio. At the moment, the proposed 35% state tax rate would position Illinois as the third-highest nationally among states where sports betting isn’t operated by the lottery.
Notably, New York imposes a hefty 51% tax on mobile betting revenue, while Pennsylvania levies a 36% tax on all operator revenue, with nearly all of it flowing into state coffers. While the state is trying to absorb this development, it also has a bill waiting in its general assembly to separate the regulatory framework of fantasy sports and sports betting.
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