Illinois set for 40% top tax rate as trade body slams “extremely disappointing decision”
State Senate and House approve sliding scale for GGR tax which would put Illinois behind only New York with the largest tax burden in a competitive US market
Illinois is set to introduce the second highest tax burden for operators in an open and competitive US market after a proposal to apply a top rate of 40% was approved by the state’s Senate on May.
House Bill 4951, otherwise known as the ‘Neighbourhood Concert Tax’, saw a Senate amendment added to the text over the weekend which will leave New York, with its 51% tax rate, as the only competitive state with a higher rate than Illinois. New Hampshire imposes a 51% tax on its online monopoly operator, DraftKings.
The bill was approved in the Senate by a 37 to 22 vote and was approved by the House on May 29, with the bill now on its way to Governor JB Pritzker for his approval.
Illinois currently taxes operators at 15% of GGR, with Governor Pritzker having previously floated the idea of raising the level to 35%.
The amendment, which would come into effect from July 1, would include a tiered system of GGR tax rates based on the annual earnings of licensed operators in the state.
At the lowest level, operators that report revenue up to and including $30m would face a 20% tax rate on their GGR.
Next up, operators that report between $30m and $50m in revenue would be subject to 25%, with that rate increasing to 30% for those with revenue of $50m to $100m.
A third tier would encompass operators generating more than $100m but less than $200m in revenue, will be hit with a 35% tax rate.
Then finally, at the highest level, a 40% tax on GGR would be applied to firms that post more than $200m in revenue each year.
It would mean FanDuel and DraftKings – the market leaders in Illinois – would be subject to the 40% tax as they generated adjusted gross revenue of $421m and $350m, respectively, in 2023.
Operators with both retail and online operations would have revenue from each arm taxed separately under the new proposals.
Capitol News Illinois reported at the weekend that a source close to the two companies revealed that “all options are on the table, including withdrawing from the state.”
The Senate’s vote was met with ire from the Sports Betting Alliance trade body, which slammed the move as an “extremely disappointing decision that will cause real harm” to the industry.
The group said the tax increase would translate to “worse products, worse promotions and, inevitably, worse odds for Illinois customers” while providing a “leg up” to the black market.
Jeremy Kudon, the body’s president, said: “Rather than heeding the outcry from tens of thousands of residents who vocally opposed more than doubling sports betting taxes, the Illinois Senate advanced a budget that would make Illinois sports betting tax the second highest in the country and counterproductively penalizes sports betting operators who invested millions into the local economy and created jobs in the state.
“This tax hike doesn’t just threaten the legal, regulated sports betting market. It will have devastating effects for operators’ in-state partners, including the most vulnerable downstate casinos, who rely on sports betting revenue to create jobs and invest in communities.
“Sportsbooks across the industry will have no choice but to reevaluate their level of investment and participation in the state should this become law,” he concluded.
Illinois sportsbooks generated $1bn in GGR in 2023, making it the third-largest state by that metric behind New York and New Jersey.