Starting January 1, Chicago implemented a new local tax on sports betting, further intensifying Illinois’ substantial tax burden on the sector and instigating legal challenges from prominent sportsbook operators. Meanwhile, state legislators are deliberating measures to prevent similar local tax initiatives from taking effect.
This 10.25% local tax on sports betting was part of the budget sanctioned by the Chicago City Council. Mayor Brandon Johnson neither approved nor rejected the budget, allowing it to pass into law. Additionally, the budget comprises a social media amusement tax, a liquor tax, and a checkout bag tax.
“I declare I will not veto the budget approved by the Chicago City Council. However, I will not endorse the budget as it stands,” Johnson expressed in a statement. “In these circumstances, I refuse to introduce the uncertainty of a government shutdown to the significant concerns facing Chicago residents.”
The Chicago tax adds to existing sports betting taxes in Illinois, which consist of a sliding scale of 20% to 40% on adjusted gross revenue, alongside a per-wager fee implemented in the state budget last year. Sportsbooks are actively seeking ways to diminish the financial impact of these wagering fees.
Prior to the initiation of the city tax, leading sportsbook operators filed a lawsuit in Cook County court contesting Chicago’s authority to enforce the levy. The complaint was lodged by the Sports Betting Alliance, which advocates for Bet365, BetMGM, DraftKings, Fanatics, and FanDuel.
The lawsuit claims that the tax framework exceeds Chicago’s “constitutional authority,” arguing that the Illinois Constitution does not grant a “home rule unit such as Chicago” the power to levy taxes or demand licenses for revenue “unless expressly granted by the General Assembly.”
Initially, the operators sought an injunction to halt the tax enforcement but later rescinded that request after the city issued licenses at the last minute. Members of the alliance had previously warned of potential withdrawals from the Chicago market upon tax implementation.
At the state level, lawmakers are advocating for legislation aimed at restricting municipalities from establishing their own sports betting taxes. The Illinois General Assembly is scheduled to reconvene in Springfield on January 14.
State Representative Dan Didech introduced a bill, HB 4171, in October prohibiting local governments from imposing individual sports betting taxes. Senator Patrick Joyce proposed another measure to reduce the state’s income tax disbursements to Chicago in relation to the city’s sports betting tax collections.
“When the legislature legalized sports betting in 2019, it was never our intention to empower local governments to devise their own regulations for this industry,” Didech stated at the time. “Chicago’s model will adversely affect consumers, push vulnerable individuals towards illicit markets, and diminish state tax revenues.”
Illinois legislators have markedly escalated the state’s tax obligations on sportsbooks over the last two legislative sessions. In 2024, the state transitioned from a flat 15% tax to the current graduated system of 20%–40% and incorporated the per-wager fee last year.
During a recent industry conference, lawmakers cautioned that increasing tax obligations could spread operators too thin, jeopardizing revenue forecasts.
“[Lawmakers] should recognize: the tax increases won’t yield the expected returns,” one lawmaker noted. “We want this industry to maintain a sustainable equilibrium.”