Illinois is just the latest state to raise taxes on mobile and retail sportsbooks’ revenues as Governor JB Pritzker signed the state bill into law along with the state budget this week.
Tax Hike
More and more states are reevaluating their share of what has become an ever-increasing pie of sports betting revenues. The states believe there is more revenue to be had via tax increases on sportsbooks’ profits and Illinois has now made it official after Governor JB Pritzker signed the tax hike into law this week.
The increase will take effect on July 1st, 2024 and it will be a progressive tax as follows:
- Operator’s Adjusted Gross Revenues of $30 million or less – 20% Tax on AGR
- Operator’s Adjusted Gross Revenues of $30-50 million – 25% Tax on AGR
- Operator’s Adjusted Gross Revenues of $50-100 million – 30% Tax on AGR
- Operator’s Adjusted Gross Revenues of $100-200 million – 35% Tax on AGR
- Operator’s Adjusted Gross Revenues of $200 million and up – 40% Tax on AGR
The tax rate on mobile and retail will be viewed separately. Therefore, if a company has a robust mobile sports betting division but only a few brick-and-mortar sportsbooks whose revenues are minimal, the retail division will be taxed at a lower rate.
“This budget builds on years of economic momentum that is revitalizing communities up and down the state of Illinois,” Governor Pritzker said. “We are on a trajectory of sustainable long-term growth.”
Illinois is one of the most lucrative sports betting markets in the nation, joining New York and New Jersey as the only states that generated over $1 billion in sports betting revenue last year. Illinois tax collectors took in $150 million at its previous rate on adjusted gross revenues of 15%. The new tax rate is expected to bring in $1.1 billion in new taxes to the state’s coffers.
Pritzker posted on X:
In February, I said we would continue Illinois’ tradition of taking on the real challenges we face and build for the future.
Don’t let the doom grifters steal your optimism about what’s ahead.
Our path is bright as evidenced by the budget I signed into law. pic.twitter.com/YBe17JxBfF— Governor JB Pritzker (@GovPritzker) June 5, 2024
Sportsbook Operators Grumbling
Naturally, the sportsbook operators are not happy about the looming tax hike and have voiced their displeasure. So too have their investors, as stock prices of the nation’s two leading operators, FanDuel and DraftKings, both saw immediate declines in their respective stocks once the news broke of Illinois’ tax increase.
Yet, even those operators, who will likely be taxed at the highest rate of 40%, can still breathe a sigh of relief that lawmakers in the Land of Lincoln restrained themselves somewhat and did not increase the high end of the scale to 51% as found in New York on all sportsbooks’ revenues with no sliding scale.
“I think that more time is not a friend to the industry,” Indian Gaming Association conference chair Victor Rocha said last week. “I think a lot of people are reevaluating. That’s the reason for the big push.”
