Illinois State Senators Passed HB 4951 Late Sunday (May 26) with Amendments That Includes an Increase to Sports Betting Tax

May 28, 2024 | Tax

ILLINOIS (May 23, 2024) — The Illinois Senate has passed a budget for fiscal year 2025 that includes a significant tax increase on sports betting operators, especially targeting the largest players in the market. This move has been met with strong opposition from the Sports Betting Alliance (SBA), which criticized the decision as detrimental to the industry. The proposal outlines a progressive tax structure, with rates escalating based on adjusted gross revenue (AGR):

  • 20% on AGR up to $30 million
  • 25% on AGR between $30 million and $50 million
  • 30% on AGR between $50 million and $100 million
  • 35% on AGR between $100 million and $200 million
  • 40% on AGR over $200 million

This tiered tax system would apply separately to retail and digital sportsbook revenues, meaning operators with both types would be taxed independently on each.

Previously, the tax rate for sports betting operators in Illinois was a flat 15% since the market’s inception in June 2021. Governor JB Pritzker had earlier proposed raising this rate to 35%, but the Senate’s current version of the budget bill surpasses this, instituting even higher rates at various thresholds.

If implemented, this would make Illinois one of the most expensive states for sports betting operators, second only to New York, which has a top tax rate of 51%. The new tax structure aims to generate additional revenue for the state but has raised concerns among stakeholders about its potential impact on the sports betting industry.

For instance, under the new rates, an operator like DraftKings, which had a retail AGR of $7 million and a digital AGR of $350 million in fiscal year 2024, would see its tax burden increase significantly. DraftKings would pay a 20% tax on its retail AGR and a 40% tax on its digital AGR, reflecting the higher end of the new progressive scale.

The bill, identified as HB 4951, originally passed the House without the progressive tax provision. Following the Senate’s amendments, it will return to the House for further consideration. The House of Representatives had adjourned for the holiday weekend just before this development, and discussions are expected to resume once they reconvene.


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