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Illinois lawmakers are refusing to back down in response to threats from online sports betting businesses to slash operations over a new graduated tax scheme included in Governor J.B. Pritzker’s most recent budget.
The newly approved budget imposes a progressive tax rate, with a 40% maximum, on FanDuel’s and DraftKings’ net revenue. The former flat rate of 15%, which was in effect from the industry’s founding in Illinois in 2020, has been significantly increased to this point.
After taking in over $729 million from Illinois bettors last year and over a quarter of a billion so far this year, the two leading mobile betting companies said the tax increase may make them rethink their commitment in the state.
Governor Pritzker argues that the increased taxes ensure these companies pay “their fair share.” Experts like Victor Matheson, an economics professor at the College of the Holy Cross, believe the threats from the betting giants are hollow.
“If I were the governor, I would say, ‘That’d be a shame to see you go. Don’t let the door hit you on the way out,’” said Matheson. He emphasized that despite their reluctance, these companies can afford the higher rates given their substantial earnings. “They’ve made hundreds of millions selling a wildly addictive product, and the government should tax that,” he added.
Lobbyists for DraftKings, FanDuel, and other major players, united under the Sports Betting Alliance, strongly opposed the tax hike during the final days of the spring legislative session in Springfield.
The proposed 35% flat tax increase was a contentious issue, complicating budget negotiations among the Capitol’s Democratic supermajorities. Some Republicans and even some Democrats expressed concern that the tax hike could penalize a lucrative industry that generated over $1 billion and contributed $150 million in state tax revenue last year.
Despite the resistance, the new tax structure is set to take effect, marking a significant shift in the regulatory landscape for sports betting in Illinois.