Illinois Progressive Sports Betting Tax Goes Back to House
Illinois Senate Amends House Bill With Hefty Sports Betting Tax Increases
The Illinois Senate passed an amendment to House Bill 4951 Sunday night that could see sportsbooks face huge tax increases. The amendment calls for an increase on the tax sportsbooks pay for doing business in Illinois.
The current tax rate is 15%, but the amendment will see taxes of 20% for smaller sportsbooks.
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The top sportsbooks, such as FanDuel or DraftKings, could see a 40% tax imposed. Illinois is using a sliding scale and taxing different amounts depending on how much revenue a sportsbook brings in.
The news of the Illinois progressive sports betting tax sent stock prices of DraftKings and Flutter, the parent company of FanDuel, down. DraftKings fell 10.29% on Tuesday, while Flutter saw a 7.7% drop.
The tax is separately calculated on retail sportsbooks and mobile sports betting. A company like DraftKings would pay 20% on the $7 million retail profit in showed for the fiscal year. The tax on DraftKings’ $350 million revenue in online betting would be a hefty 40%. Only New York has a higher tax in the country.
The Illinois progressive sports betting tax is a unique concept that will be looked at by other states looking to boost revenue. States are trying to squeeze every dollar out of sports betting, although they can’t tax too much or sportsbooks could leave the state.
Seeing a reduction in the number of available sports betting apps is the worst case scenario for Illinois residents. Expect the sportsbooks to make a final push to get the amendment nullified for when the House takes up the bill again.
$DKNG $FLUT shares are trading lower after the Illinois Senate approved a 2025 budget imposing a progressive tax increase on sports betting operators.
The new tax structure will impose a 40% tax rate on operators with the highest AGR, nearly 3x the current rate and making it the… https://t.co/1YvMy8PqWg pic.twitter.com/pyLTV53OFM
— Wall St Engine (@wallstengine) May 28, 2024
Sportsbooks Oppose Tax Increase
Not surprisingly, the sportsbooks are all opposed to the Senate amendments to the bill. Sports Betting Alliance President Jeremy Kudon wasted little time getting out a statement after the tax increase was added to HB 4951.
“This tax hike means worse products, worse promotions and, inevitably, worse odds for Illinois customers – not to mention provide a massive leg up to the dangerous, unregulated illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations,” Kudon said.
If the tax increase ultimately passes the House, the scores and odds from Illinois could change. Sportsbooks could change lines to -115 instead of -110 and blame the Legislature.
Prop bets and futures could see bigger house holds. The sportsbooks will likely pass on part of the cost of doing business in the state to its customers.
The Illinois progressive sports betting tax will see a 20% tax on adjusted gross revenue up to $30 million and 25% on adjusted gross revenue of $30 to $50 million. The tax increase to 30% on adjusted gross revenues of $50 to $100 million.
There is a 35% tax on adjusted gross revenue of $100 to $200 million and 40% on those companies with adjusted gross revenue of more than $200 million.
Sportsbooks are already operating at a disadvantage in Illinois. Unlike most states, the sportsbooks can’t deduct the cost of free bets and other promotions. This bill will add to the tax burden of the sportsbooks if the House approves of the changes.
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