Starting July 1, 2024, Illinois sports betting operators will be a little less lucky. Not only will they face one of the highest tax rates in the country, but they will also lose all potential revenue on Illinois collegiate sports betting.

Illinois Hikes Taxes on Sports Betting

In early June, Illinois Governor J.B. Pritzker signed into law Public Act 103-0592 imposing the first progressive tax rate on sports betting in the nation, significantly increasing the existing 15% rate. The law raises the privilege tax on a master sports wagering licensee’s annual adjusted gross sports wagering receipts (AGSWR) to the following rates:

• 20% of annual AGSWR up to and including $30 million;
• 25% of annual AGSWR in excess of $30 million but not to exceed $50 million;
• 30% of annual AGSWR in excess of $50 million but not to exceed $100 million;
• 35% of annual AGSWR in excess of $100 million but not to exceed $200 million; and
• 40% of annual AGSWR in excess of $200 million.

Compared to other states with similar privately-operated sports betting structures, Illinois will have the second-highest tax rate in the U.S., behind only New York. In addition to this privilege tax, the state collects an additional 2% of AGSWR from sports wagers placed within Cook County. The new law leaves intact this additional 2% assessment.

Based on 2023 data, Caesars, ESPN BET, and BetMGM would fall into the 25% tax bracket, while BetRivers and Fanatics Sportsbooks would reach the 30% tax bracket. At this time, only FanDuel and DraftKings would hit the 40% rate.

Notably, the bill currently distinguishes between sports wagering conducted over the internet – such as through mobile applications – and non-internet forms of sports wagering, but imposes the same rates irrespective of how the wager is placed. This distinction could lay the groundwork for future legislative action focused on raising the progressive tax rates for specific forms of betting.

Betting on Illinois Collegiate Sports Will Be Illegal Beginning July 1, 2024

On July 1, 2024, Illinois sports wagering operators will no longer be able to accept bets on Illinois collegiate sports.

The existing structure for betting on Illinois college sports was already limited in scope. In order to protect athletes, Illinois only allowed for in-person Tier 1 wagers that were unrelated to an individual athlete’s performance. Tier 1 wagers are made before the sporting event starts and can only be determined by the game’s final outcome or score. Pursuant to Section 25-25(d-5) of the Illinois Sports Wagering Act, this limited permissible collegiate sports wagering is permitted until July 1, 2024, and the Illinois General Assembly adjourned its session without extending this date.

While this change will likely have a smaller impact than the aforementioned tax hikes, it is another indication of the unique relationship between Illinois government leaders and sports betting operators within the state.

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Taft summer associate Maria Palazzolo also contributed to this law bulletin.