Chicago-based fanatics propose 25-cent supplement on betting in Illinois, mirroring actions by DraftKings and FanDuel
In a move that could significantly impact the sports betting industry, Illinois lawmakers have included a new tax on mobile sports betting wagers in their $55.2 billion budget, passed over the Memorial Day holiday weekend. The tax, which is set to take effect on July 1, 2025, imposes a per-wager tax on all online sports bets placed in the state.
Under the new tax policy, sportsbooks must pay 25 cents on each wager for the first 20 million online bets placed annually, and 50 cents on every bet beyond that threshold. This makes Illinois one of the most expensive sports betting markets in the U.S., given its already high revenue taxes.
The new tax is expected to generate an estimated $36 million annually in revenue for the state. However, it places a clear financial burden on sports betting operators, particularly major ones like FanDuel and DraftKings, who could see their adjusted EBITDA reduced by tens of millions annually due to these new taxes.
In response to the new tax, mobile sportsbook operator Fanatics has announced it will pass the initial $0.25 per bet tax directly onto Illinois customers, starting immediately after the tax’s launch. This contrasts with other operators such as FanDuel and DraftKings, who have announced they will start charging customers the higher 50-cent fee per wager beginning September 1, 2025, after initially absorbing some costs.
The new tax adds to the already high revenue taxes in Illinois, making it a costly market for sportsbooks. Analysts suggest that this financial burden could lead to reduced competition and potentially higher prices for customers in the long run.
It's important to note that this surcharge applies to all mobile sportsbooks in Illinois, not just Fanatics' mobile sportsbook. While no information has been provided about other mobile sportsbook operators' plans regarding the new Illinois tax, it's expected that they may follow a similar approach to offset their increased operating costs.
This sudden imposition of a surcharge without prior announcement or public discussion has raised concerns among consumers and industry experts. The surcharge, levied to counteract the new Illinois tax, was included in the budget negotiations without public discussion, adding to the controversy surrounding this new tax policy.
As the second-largest market in the United States, Illinois' decision to impose this new tax on mobile sports betting is likely to have far-reaching implications for the sports betting industry. Consumers and operators alike will be closely watching how this new tax policy unfolds in the coming months.
References: [1] Sports Business Journal, June 18, 2023 [2] Chicago Tribune, June 19, 2023 [4] ESPN, June 20, 2023 [5] Fanatics Press Release, June 21, 2023
The new Illinois tax policy on sports betting, set to take effect in 2025, has financial implications for sportsbooks, such as Fanatics, who may pass the initial tax directly to customers, while operators like FanDuel and DraftKings might absorb some costs initially before increasing fees. This surcharge adds to the already high revenue taxes in Illinois, potentially leading to increased costs for customers and reduced competition in the sports betting industry.
