The tax structure for gambling in Illinois is adapting, as Chicago considers a local 10.25% tax on sports betting revenues, which would supplement the state’s already existing progressive tax system and per-wager fees aimed at transforming revenue collection for gaming.
In 2024, Illinois implemented a progressive tax framework for sports betting under Governor JB Pritzker’s fiscal strategy, moving away from the previous flat tax of 15%. Now, online operators are taxed between 20% to 40% based on their adjusted gross revenue (AGR), a shift that increased tax revenue by $261.9 million for fiscal year 2025 when compared to the prior year.
Additionally, a per-wager fee was instituted on July 1, mandating mobile sportsbooks to pay $0.25 for each of the initial 20 million bets and $0.50 for any subsequent wagers. This charge generated over $10 million in July and August alone, with expectations for further increases as platforms like FanDuel and DraftKings exceed the 20-million bet mark.
The Sports Betting Alliance (SBA), representing companies such as BetMGM, DraftKings, and FanDuel, has expressed dissent regarding the per-wager fee. In response, operators have started to implement transaction fees and raise minimum bet amounts across the state.
Johnson’s 2026 Budget Initiative
In this context, Mayor Brandon Johnson has introduced a 10.25% local tax on adjusted gross sports betting revenue as part of his $16.6 billion “Protecting Chicago Budget” proposal for fiscal year 2026. If approved by the City Council, this initiative is expected to yield approximately $26 million per year.
“To enhance affordability for Chicago’s working families, the Protecting Chicago Budget promotes a fair and equitable revenue strategy—one where everyone’s contribution aligns with their capacity,” Johnson stated. “Feedback from our citywide Budget Engagement Survey indicated that residents favored new revenues through community safety surcharges, online sports betting, and increased fees for vacant buildings.”
The suggested tax is part of a larger strategy aimed at closing a $1.15 billion budget gap without resorting to increases in property taxes.
Task Force Recommendations
Johnson’s proposal emerges from recommendations made by the Chicago Financial Future Task Force, which outlined various strategies to tackle the city’s anticipated budget deficit.
However, the task force initially suggested a per-wager charge instead of a percentage-based tax. Their Options for Chicago’s Financial Future report proposed a 50-cent fee for every online wager placed within city limits, estimating potential annual revenues up to $17 million.
The task force’s findings indicated that nearly 98% of sports betting activity in Chicago occurs online, with the metropolitan area accounting for 20% of all online wagers in Illinois. This forecast also included a 10% estimate for a potential loss rate as bettors might avoid a local tax.
Process for Implementation
To establish the proposed local tax, the city’s budget process necessitates that various departments submit their budget proposals to the Office of Budget and Management (OBM), which will compile a forecast. Following this, the mayor’s recommendations will be presented to the City Council, where hearings will be conducted by the Committee on the Budget and Government Operations. A minimum of 26 out of the 50 elected alderpersons must approve the budget for it to be implemented.
Potential Political Considerations
There is no guarantee that the sports betting tax will be incorporated into the final budget. Discussions in the council may also explore alternative gaming options, including the potential introduction of video gaming terminals (VGTs). Johnson has voiced his opposition to the inclusion of VGTs in Chicago, citing concerns regarding their repercussions on existing casino deals.
According to a Host Community Agreement, Bally’s is obligated to pay the city $4 million each year for its River West casino project. The budget forecasts an expected $44 million in tax revenue from Bally’s when its permanent facility opens in late September.
Bally’s temporary casino at Medinah Temple in River North has brought in $11.4 million in tax revenue through September 2025, which is below the city’s $35 million annual estimate. In 2024, it generated $16.1 million according to budget records.
If the local 10.25% wagering tax is accepted, the overall rate for major operators in Illinois would exceed 50% when combined with the state’s highest 40% AGR tax. This plan would also align Chicago with other regions that utilize gambling-related taxes as part of their long-term revenue frameworks to address fiscal challenges.