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Chicago sports betting operators moved quickly to court after a new city tax took effect at the start of the year. A lawsuit filed this week seeks to block the measure, arguing that Chicago lacks the authority and framework to impose it.
The dispute now places city officials, state lawmakers, and major betting platforms on opposing sides, with revenue and regulatory control at stake.
Chicago new sports betting tax is already facing legal resistance. The Sports Betting Alliance filed suit days after the 10.25 percent levy took effect, arguing the city lacks authority to tax online wagering.
Operators say the tax risks pushing bettors to offshore sites and could weaken Illinois overall sports betting revenue. State lawmakers are now advancing bills that would block or offset the city move.
Good to Know
The Sports Betting Alliance filed a lawsuit seeking a temporary restraining order against Chicagos new sports betting tax. The group represents major online operators including FanDuel, DraftKings, and BetMGM.
The tax forms part of the latest budget from Mayor Brandon Johnson, who said the measure could generate about $26 million in new revenue as the city works to close a $1.2 billion budget gap.
In court filings, the alliance argued that the tax “represents an unconstitutional assertion of authority that rests exclusively with the state.” Operators also warned they could exit the Chicago market if the tax remains in place and said the city lacks a licensing and standards structure to oversee sports betting.
According to the lawsuit, the tax was scheduled to take effect only two weeks after the city budget passed. The filing said that timeline left no opportunity to create review standards, define application rules, establish processing timelines, or outline enforcement mechanisms tied to licensing.
The alliance also warned that higher costs could push bettors toward unregulated offshore platforms, reducing consumer protections and weakening legal market participation within the city.
Those concerns extend beyond Chicago. The lawsuit argues that any operator withdrawal from the states largest market could reduce overall state tax receipts tied to regulated sports betting.
Illinois legislators have already taken steps aimed at limiting city authority over gambling taxes. The state collected $365 million in sports betting tax revenue through October, and lawmakers said a Chicago pullout could affect that total.
State Senator Patrick Joyce filed legislation that would remove state funding from Chicago equal to the amount raised by the city tax. State Representative Daniel Didech, chair of the House Gaming Committee, introduced a separate bill that would bar local governments from taxing or regulating gambling activities, including sports betting.
The dispute unfolds as Illinois operators already face rising state-level costs. Earlier in the year, lawmakers approved a per-wager levy of 25 cents on the first 20 million bets, doubling beyond that mark. Some operators passed those costs to bettors through fees and higher minimum wagers.
The Illinois Gaming Board later reported that legal wager volume fell by five million bets in September. The state also enacted higher operator taxes in 2024 under a tiered structure that reaches up to a 40 percent rate.
Sports betting in Illinois operates under state law, with licensing, compliance, and tax structures handled at the state level. Cities do not issue betting licenses, nor do they regulate sportsbook operations.
Chicago added a 10.25 percent local sports betting tax through the city budget. The measure took effect January 1 without a separate licensing or enforcement framework tied to betting activity.
The Sports Betting Alliance argues that only the state can impose gambling taxes. The lawsuit claims the city tax conflicts with state authority and lacks standards for oversight or enforcement.
Illinois lawmakers warned that operators exiting Chicago could reduce statewide tax receipts. Bills introduced in Springfield aim to block local gambling taxes or financially penalize cities that impose them.