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Starting this week, Illinois sportsbooks will operate under a new progressive tax rate, significantly increasing their financial obligations. The 2025 state budget introduced this tax hike, effective Monday, which adjusts the rates based on operators’ gross revenues.
The new tax structure ranges from 20% to 40%, replacing the previous flat rate of 15%. This change positions Illinois as the state with the second-highest sportsbook tax rate in the nation. The state anticipates this adjustment will generate over $200 million in additional revenue. In 2023, Illinois collected just over $1.5 billion in tax revenue from online sports betting and casinos, while the state lottery, operational since 1974, reported about $2.32 billion in revenue.
The American Gaming Association noted a 22% increase in U.S. sports wagering revenue, reaching $3.33 billion in the first quarter of 2024. This surge has caught the attention of state governments nationwide, leading to various tax rate adjustments. For instance, New York has set a maximum tax rate of 51%, and New Jersey is contemplating doubling its rate to 30%. Meanwhile, Massachusetts recently considered increasing its tax rate from 20% to 51%, although the proposal failed in May.
The shift in sports betting regulation followed a pivotal 2018 U.S. Supreme Court decision, which invalidated a federal law banning sports gambling. Prior to this ruling, Nevada was the sole state with legal sports betting. Today, 30 states and Washington D.C. have legalized online sportsbooks, as reported by the American Gaming Association.
This significant change in Illinois’ tax policy underscores a broader trend of states seeking to capitalize on the booming sports betting industry. The increased tax revenue is expected to support various state initiatives, reflecting the growing importance of regulated sports betting in state economies.