Illinois OSB Tax Strategy Likely Not to Inspire Similar Actions, According to Expert Analysis
June 2, 2025
4:45 AM EST
Todd Shriber @etfgodfatherFinancial Gaming Business Mergers and Acquisitions
Illinois takes another swing at sports betting taxationThe latest hike to a 25 cent per wager rate may not be followed by other states
Shares of major sports betting operators took a hit on Monday after Illinois announced they will be raising their sports betting tax once again. Starting in 2026, the Land of Lincoln will implement a levy of 25 cents on every wager, which doubles to 50 cents per bet after the first 20 million bets.
According to analyst David Katz at Jefferies, the increased tax burden could be a red flag for the gaming industry, yet he believes other states won't follow suit.
"The group shouldn't read too much into this," Katz writes in his report to clients, "as it's not likely that other states will follow the Illinois per-bet tax model."
Last year, Illinois implemented a progressive sports betting tax hike that targeted the largest operators like FanDuel and DraftKings. Although other states have raised their sports betting taxes, they didn't follow the Illinois model.
Navigating Illinois' Latest Tax Increase
Heavier taxes on gross gaming revenue (GGR) can be mitigated with changes in promotions and offerings, but this tax hike is different. Imposing a levy on each bet, operators have limited options.
"Structuring minimum bet sizes could face backlash from bettors and regulators," Katz adds. "Targeted promotions might ease the blow, or operators could revisit the surcharge efforts abandoned by DraftKings last year."
Last year, DraftKings attempted to introduce a per bet surcharge on sports wagers in Illinois, New York, Pennsylvania, and Vermont as a way to offset the high taxes. However, the plan was scrapped as other companies failed to join in.
A New Approach for Other States
Despite the need for revenue, Illinois isn't the only state facing such a challenge. It's improbable that other states will move quickly to raise their sports betting taxes, as they look to other alternatives like online casinos.
"Legalizing iGaming could prove to be a far more sensible decision for many state governments," Katz notes, citing New Jersey's model as a successful example.
It's possible that Illinois will introduce iGaming in their next budget, something the industry would welcome. Conversely, some analysts predict that only Florida may join the ranks of iGaming states before 2027, in addition to Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia.
"If states are looking for a template, they should consider the Golden State's progressive approach," Katz concludes.
- The latest increase in Illinois' sports betting tax to 25 cents per wager might impact the financial health of major sports betting operators.
- Regional news about Illinois' sports betting tax hike sparked conversations in the political realm of the gaming industry.
- With the imminent implementation of a 25 cent per bet tax in Illinois, operators are seeking alternative strategies, such as adjusting promotions or targeted offers.
- The increased sports betting tax in Illinois is not expected to be replicated by other states, as seen in previous tax adjustments.
- In light of Illinois' tax hike, some states are looking towards online casinos, or iGaming, as a potential source of revenue instead of raising sports betting taxes.
- The introduction of iGaming in Illinois' next budget could serve as an attractive development for the gaming industry, following the successful iGaming model established in New Jersey.
