Illinois’ FY2025 budget, encompassing a significant tax increase on gambling operators, was officially approved by state senators on Sunday, 26 May. This development has ushered in a wave of anticipatory scrutiny and reactions as the bill now awaits Governor J.B. Pritzker’s decision. The tax hike, should it be signed into law, will alter the landscape of sports betting in Illinois.
Initially proposed by Governor Pritzker to be a staggering 35%, the final senate-approved tax rate will still have a considerable impact, seeing the rates increase from the current 15%, which has been in place since June 2019 when sports betting first became legal in Illinois.
The newly approved rates delineate a progressive scale based on an operator’s adjusted gaming revenue (AGR). Specifically, an AGR up to $30 million will be taxed at 20%. Operators earning between $30 million and $50 million in AGR will encounter a 25% tax rate. For those with AGR between $50 million and $100 million, the tax rate will climb to 30%. Meanwhile, revenues up to $200 million are set to be taxed at 35%. Operators with an AGR exceeding $200 million will face a hefty 40% tax rate, making it the second highest in the U.S., trailing only behind New York’s 51%.
The Illinois House earlier approved this FY2025 budget on Wednesday with a tight vote of 60-47. Governor Pritzker, who originally proposed the higher rate, will make the final decision on whether this tax hike will be enacted into law. If approved, these changes will be effective from 1 July.
Passage of this tax increase was by no means a guaranteed outcome. The early morning hours saw intense deliberations and dramatic shifts in voting patterns. The decisive vote was cast around 04:30am local time, signifying the end of a prolonged and uncertain negotiation process.
State-house reporter Hannah Meisel was present for the vote and noted the unpredictability, quoting the need for a video of the roll call due to frequent switches in positions.
. According to her observations, it took three attempts before the Democrats were able to secure the necessary 60 votes, with the defining vote cast by Larry Walsh, a Democrat from Elwood.
This drawn-out process drew criticism from various quarters, including Republican representative Patrick Windhorst, who remarked on the timing and nature of the vote. “I think it should be clear to everyone in this state what this (Democratic) supermajority is willing to do to ram a tax increase down the throats of the people of Illinois at 04:30 in the morning,” Windhorst stated.
Unsurprisingly, the imposition of this tax hike has met with stern opposition from the gambling industry. Representing entities such as Fanatics Sportsbook, FanDuel, DraftKings, and BetMGM, the Sports Betting Alliance (SBA) has voiced concerns over the potential repercussions of this legislative measure.
“This tax hike doesn’t just threaten the legal, regulated sports betting market – it will have devastating effects for operators’ in-state partners, including the most vulnerable downstate casinos, who rely on sports betting revenue to create jobs and invest in communities,” said Jeremy Kudon, president of the SBA, on X.
Ahead of the house’s approval, the market already began reacting to the unfolding scenario. The stock prices of prominent Illinois operators such as DraftKings and Flutter Entertainment, the parent company of FanDuel Group, exhibited noticeable declines.
When trading resumed on Tuesday, 28 May, Flutter’s stock price fell by 3.7%, dropping from its pre-weekend closing price of $204.11 to $196.64. Closing at $188.33 on Tuesday marked a 7.7% decrease from its closing price before the weekend. Similarly, DraftKings experienced a substantial 12% drop, with their stock plummeting from $40.75 to $35.88.
As the FY2025 budget sits on Governor Pritzker’s desk, the entire gambling industry and stakeholders across Illinois remain on edge, closely monitoring his impending decision. This tax increase, if enacted, will shape the economic structure and operational dynamics for gambling operators in Illinois, signaling a transformative shift in the state’s approach to taxing the sports betting sector.
