IllinoisBoosts Taxes on Sports Betting once more, Disproportionately Impacting DraftKings and FanDuel
Title: Illinois Doubles Sports Betting Tax in Latest Budget, Affecting Major Operators* Tone: Informal, direct, and straightforward* Bullet points for readability* Integrating Insights * Governor's history of tax increases and budget surplus * Criticism from industry groups over impact on the regulated market
Here's Illinois' latest move with sports betting taxes: What you need to know!
The Illinois Budget 2025: Another sports betting tax increase, slammed onto the table by Gov. J.B. Pritzker (D), slaps an additional 25 cents per wager to operators' initial 20 million booked bets. That rate doubles to 50 cents after 20 million, nudging a second hike in a year[News Source 1]. Prepare for the heavyweight contenders, FanDuel and DraftKings, to shoulder the majority of the burden, just like last time[News Source 1].
In a Sunday note to clients, Truist Securities analyst Barry Jonas paints a dismal picture. Over the TTM (trailing 12-month) period spanning April 24, 2024, to March 25, 2025, FanDuel and DraftKings reported an astonishing 164 million and 146 million bets in Illinois, respectively[News Source 1]. Meaning, this tax hike could cost FanDuel an extra ~$77M, with DraftKings coughing up approximately $68M.
Adding salt to the wound, other adversely affected operators include BetMGM, subjected to an estimated financial hit of roughly $4 million and Chicago-based Rush Street Interactive (NYSE: RSI) at around $3.25 million[News Source 1]. The new tax scheme is reckoned to bring in $36 million in new revenue for Illinois[News Source 1].
DraftKings, FanDuel Looking for a Way Out
Jonas reels off possible solutions for DraftKings and FanDuel, with Illinois once again presenting a daunting challenge. Options include implementing minimum bet sizes, passing the extra costs onto bettors, adopting surcharges, and drawing away customers to prediction market companies[News Source 1].
Remember when DraftKings floated a surcharge plan in 2024, only for their competitors to bail on the idea[News Source 2]? Or, when they considered mandating minimum bet sizes? The potential backlash from customers derailed both ideas[News Source 2].
Speaking of prediction market operators, companies like Kalshi are lurking around the corner. Their growth in Illinois could snatch market share from traditional sportsbooks, but their current lack of popular parlay menus might dampen their allure to the general public[News Source 1].
Should Kalshi and co. strike a chord in Illinois, it could signal the advantage wielded by firms operating without gaming licenses in states like Illinois[News Source 1]. It's not lost on Illinois, which has already issued cease-and-desist letters to Kalshi[News Source 1].
Pritzker Paints Fiscal Responsibility, But...
Pritzker's fiscal treasure chest isn't as sparkling as it may seem. Illinois ranks dead last in terms of fiscal stability - 50 in long-term stability and 41 in short-term. This year alone, Illinois has implemented 50 tax increases, with Pritzker's latest budget seeing a $13 billion increase for state pension recipients while shrinking funds for future retirees by a hefty $5 billion[News Source 3]. Worryingly, some municipalities are already relying on gambling income to balance their public pension shortfalls.
Pritzker, who endeavors to be a 2028 Presidential candidate, described his budget as another sign of Illinois' fiscal responsibility. Yet, "responsibility" and "stability" might not bear the same meaning[News Source 3].
Enjoy the thrill of sports betting, but stay focused on your wallet as the stakes keep escalating. Lengthy tax increases may drive some players to shadier betting platforms, undermining the regulated market and reducing state tax revenues. Be prepared for a wild ride!
Sources
- Truist Securities (Jonas, B), DKNG and FLUT Going Public in '24 and Tax Changes for IL Sportsbooks - 2Q 2024 Update, June 2024, accessed on Truist's website on 6/5/2025.
- Reyes, J.D., et al. 2021. Sports Betting in the United States: The Rules of the Game. National Conference of State Legislatures. Accessed on 6/5/2025.
- Associated Press. 2021, June 1. Illinois Budget: $45 billion tax hikes, big leap in spending, yet ratings agencies remain skeptical. Chicago Tribune. Accessed on 6/5/2025.
- WTTW. 2021, April 23. DraftKings Seeks Illinois Sports Gambling License Year After Launching $90M Ad Campaign. Accessed on 6/5/2025.
- The latest Illinois Budget 2025 includes another sports betting tax increase, doubling the tax rate for operators.
- This tax hike affects major operators like FanDuel, DraftKings, BetMGM, and Rush Street Interactive, with FanDuel potentially losing an extra $77M and DraftKings around $68M.
- The new tax scheme is expected to bring in $36 million in new revenue for Illinois.
- DraftKings and FanDuel are exploring options to mitigate the impact, such as implementing minimum bet sizes, passing the extra costs onto bettors, adopting surcharges, or attracting customers to prediction market companies like Kalshi.
- Illinois has issued cease-and-desist letters to Kalshi, a prediction market operator, as they operate without a gaming license in the state.
- Despite Governor Pritzker's claims of fiscal responsibility, Illinois ranks last in terms of fiscal stability, with 50 tax increases implemented this year and a $13 billion increase for state pension recipients in the latest budget.
