Could Sports Betting Tax Hike Propel New Illinois Online Casino Talks?

Written By Phil West on June 24, 2024
Online casino graphic symbolizes how Illinois could take legalization cue from sports betting tax rate hike

Despite a pair of online casino bills failing to gain traction in the most recent General Assembly session, a decision that Gov. J.B. Pritzker and legislators made three weeks ago could provide new momentum for online casinos.

The approval of a state budget at the close of the 2024 session included a tiered tax hike on sports betting that raised the ire of DraftKings and FanDuel, which will pay at the high end of the new 20% to 40% tax rate for Illinois’ 13 sportsbook operators.

A likely budget deficit in the coming years compelled lawmakers to make the controversial change, and the fact that they did could foretell how they will approach Illinois online casino legalization in the next session.

Sports betting restrictions may boost iGaming in Illinois

Pritzker has indicated in recent communications, including an email to the Chicago Sun-Times, that the new taxes course-correct for sports wagering companies to “pay their fair share.” Another way to read that statement is that Pritzker needs to increase the share sportsbooks pay to a state needing a balanced budget.

This is the rationale that could lead lawmakers to consider legalizing online casinos.

As all seven states with legal online casinos illustrate, online casino revenue is exponentially greater than sports betting revenue.

Steve Ruddock, a gambling industry analyst who runs the Straight to the Point Substack, contemplated on Thursday whether the move might push things forward for iGaming in the Land of Lincoln. He said,

Illinois has many options. There is the still-in-progress Chicago casino, calls to regulate VGTs in Chicago, closed racetracks waiting for a second life, and more on the gambling front alone. Regardless of how desperate the budget situation becomes, there is an extremely powerful and influential group vehemently standing in the way of online casino legalization: the VGT (video gaming terminal) industry.

While he noted that “online gambling is a no-go without the VGT industry’s approval,” given the tax revenue and lobbying power of VGT operators, he also looked at the situation in New York, where Gov. Kathy Hochul needs to generate revenue to address the New York City subway system’s myriad needs.

He observed, “MTA funding provides a glimpse into how online casinos will eventually be legalized, and it starts and ends with money. When one fiscal problem is solved, another quickly rears its head, and there are only so many fingers you can use to plug a hole until you get to online gambling.”

Illinois could become the biggest battleground between VGT (video gaming terminal) operators and online casino companies in the country. If a looming multi-year budget deficit materializes in 2025, an influx of gaming and VGT lobbyists could spark a heated debate over who gets access to the robust Illinois market.

Online casino bills could be revived in 2025 session

In the most recent session, both House Bill 2239, introduced by State Rep. Edgar Gonzalez Jr., and Senate Bill 1565, sponsored by State Sen. Cristina Castro, floundered in committee. The bills were close to identical, with each calling for a 15% tax on revenue from online casino operators. However, they’ll now have to wait until 2025—though the changes in Illinois sports betting could make that landscape friendlier.

Photo by Shutterstock
Phil West Avatar
Written by
Phil West

Phil West is a longtime journalist based in Austin, Texas, whose bylines have appeared in The Daily Dot, Nautilus, Pro Soccer USA, Howler, Los Angeles Times, Seattle Times, Philadelphia Inquirer, San Antonio Express-News, Austin American-Statesman, and Austin Chronicle. He has also written two books about soccer.

View all posts by Phil West
Privacy Policy