- State unveils second sports betting tax increase in a year
- Calls for operators to pay 25 cents on the first 20 million bets booked
- After that, the levy increases to 50 cents per bet
The Illinois budget signed Saturday by Gov. J.B. Pritzker (D) contained a late addition that resulted in the state’s second sports wagering tax increase in a year.
The proposal, floated by the governor’s office, adds a levy of 25 cents per wager on an operator’s first 20 million booked bets with that rate doubling to 50 cents per bet for each wager placed after that initial 20 million. As is the case with the graduated tax plan implemented last year in the state, Flutter Entertainment’s (NYSE: FLUT) FanDuel and DraftKings (NASDAQ: DKNG) will bear the brunt of the new tax scheme.
In a Sunday note to clients, Jefferies analyst David Katz said that over the trailing 12-month (TTM) period spanning April 24, 2024, to March 25, 2025, FanDuel and DraftKings booked 164 million and 146 million bets, respectively in Illinois, meaning there could be consequences for those operators’ financial guidance.
Given these TTM figures, FanDuel would have paid an additional ~$77M, followed by DKNG at ~$68M (full-year impact). If implemented on 7/1/2025, we estimate the costs to company guidance for this year only (July-Dec) would be ~$40-45M for FLUT and ~$35-40M for DKNG,” observes Katz.
Among other operators that are publicly traded or with ties to listed entities, BetMGM could see a financial hit of approximately $4 million due to the latest Illinois tax hike with Chicago-based Rush Street Interactive (NYSE: RSI) potentially pinched to the tune of $3.25 million, according to the Jefferies analyst. It’s estimated the new levy will bring in $36 million in new revenue for the state.
DraftKings, FanDuel Cards to Play in Illinois
Katz highlights several possibilities for DraftKings and FanDuel in Illinois against the backdrop of another tax increase, including the possibility of those operators mandating minimum bet sizes, passing the costs onto bettors in the form of surcharges, and the possibility of prediction market companies pilfering market share from traditional sportsbooks.
The analyst acknowledges there are bad optics with minimum bet mandates and last year, DraftKings floated a surcharge plan in several high-tax states only to scrap the idea when none of its competitors would go along.
As for the potential threat from prediction market operators such as Kalshi, it’s possible the new Illinois sports betting tax could drive bettors to those platforms for straight bets, but those firms don’t yet feature the parlay menus that make DraftKings, FanDuel, and other online sportsbooks so popular with the betting public.
Should Kalshi and others like it gain share in Illinois, it would also highlight the advantage possessed by those firms to operate in states without gaming licenses. That’s not lost on Illinois, which is among the cadre of states that have issued cease-and-desist letters to Kalshi. For his part, Katz notes the latest sports betting tax increase in Illinois could open the door to iGaming legislation being approved in the future.
“Overall, the FY26 IL budget increases state spending on what we expect to be a lower revenue base, with IL likely having limited opportunities to extract further tax dollars from OSB,” said the analyst. “We still view iGaming as the next move for budget-challenged states given the sizable tax contributions it can offer.”
Pritzker Hails Fiscal Responsibility, but …
Pritzker, who’s rumored to be a 2028 presidential candidate, hailed the budget — the seventh consecutive delivered in balanced form — as another sign of his state’s fiscal responsibility. Fortunately for the governor, “responsibility” and “stability” aren’t always the same thing.
Illinois ranks 50th in terms of fiscal stability — 50th in long-term stability and 41st in short-term — according to U.S. News & World Report. For fiscal 2026, Pritzker’s office projected a deficit of $3.2 billion, which is forecast to grow to $4.1 billion in the next fiscal year and to $5 billion in fiscal 2028.
Since Pritzker took office in January 2019, Illinois has implemented 50 tax increases and the state’s budget has surged $16.7 billion, according to Illinois Policy. Add to that, Pritzker’s latest budget includes a $13 billion increase for the state’s public pension recipients while slashing funding by $5 billion to keep the system afloat for future retirees. Some municipalities in the state are already leaning on the gaming industry to shore up public pensions.
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