Illinois’ New Graduated Tax Rate Is Second Highest Behind New York

Written By Dan Holmes on July 2, 2024
Bar graph showing rising taxes signifies Illinois's graduated sports betting tax rate taking effect

Sports betting companies are now operating under a new tax burden in Illinois.

Beginning July 1, the state tax on online sportsbook revenue was raised from a flat 15% rate to a top rate of 40%. For the two biggest sports betting companies in Illinois, that should mean a tax bill increase of more than 120% immediately.

Basics of Illinois’ new graduated sports beting tax rate

The new Illinois sports betting tax on adjusted gross revenue works like this:

– 20% on the first $30 million in adjusted gross revenue (AGR).

– 25% on AGR between $30-50 million.

– 30% on AGR between $50 million and $100 million.

– 35% on AGR above $100 million up to $200 million.

– 40% tax on AGR above $200 million.

DraftKings Illinois and FanDuel Illinois, the top two sportsbooks in Illinois with almost 70% of the market, will have to pay the 40% rate. They are the only such operators in that tax bracket. Based on recent revenue reports, FanDuel will see a 126% tax hike, and DraftKings will pay 130% more. The economic hit is large enough that when the state announced its new tax rate table, both DraftKings and FanDuel called for consumers to object and made veiled threats to leave Illinois over the increases.

Illinois’ upper sports betting tax boundary second only to New York

Only New York has a higher top tax rate than Illinois. The Empire State carries a 51% tax across the board on adjusted revenue for sports betting operators.

As one of the three biggest sports betting markets in the U.S., Illinois will generate hundreds of millions in tax revenue under the new tax system. That windfall could have repercussions. There’s speculation that the sports betting tax hike could lead to new talks among lawmakers about online casino legalization.

Illinois sports betting is on a roll. The state has reported seven straight months of at least $1 billion in total handle, with $1.1 billion reported in April. That figure represents the dollar total of all sports wagers placed.

Based on recent revenue in Illinois, the new tax hike, which mostly impacts top operators will lead to an increase of between $150 and $175 million in taxes collected annually.

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Dan Holmes

Dan Holmes is a contributor for PlayIllinois with plenty of experience under his belt. Dan has written three books about sports and previously worked for the National Baseball Hall of Fame and Major League Baseball. He also has extensive experience covering the launch of sports betting in other states, including Ohio, Massachusetts and Maryland. Currently, Dan resides in Michigan with his family.

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