Illinois’ new sports betting tax has sparked fierce backlash, raising questions about whether municipalities should have the authority to tap into gambling revenue.
Since 1 January 2025, the measure has imposed a 10.25 percent levy on net gambling revenue—an added layer on top of existing state fees charged per bet. Together, these charges place Illinois among the nation’s most aggressive sports betting tax regimes.
The rollout coincides with Problem Gambling Awareness Month, recognised statewide to reduce stigma and promote free treatment resources through the Illinois Department of Human Services (IDHS) and the Illinois Council on Problem Gambling (ICPG).
Concerns over illegal markets and state-city tensions
Lawmakers across party lines warn that the tax could push bettors toward illegal markets, resulting in a possible reduction of state revenues. Chicago officials, meanwhile, worry that the measure could further strain relations with state legislators and complicate future financial partnerships.
Rep. Daniel Didech (D-Buffalo Grove), chair of the Illinois House Gaming Committee and a former professional poker player, stressed that the legislature never intended for municipalities to create a “patchwork” of tax rates. In October 2025, he introduced House Bill 4171—co-sponsored by Democrats and Republicans—to block local governments from imposing their own sports betting taxes. The bill passed in February 2026 and, if enacted, would immediately nullify Chicago’s tax.
Revenue stakes and legal challenges
Illinois has become a national leader in sports wagering revenue. Since the 2019 Sports Wagering Act, the state generated $429 million in tax revenues in FY2025, ranking fifth nationwide and first in the Midwest, according to several media reports.
But numbers dropped when the per-wager was enacted. Data reveals that betting volume dropped 15 percent between September and October 2025, when the per-wager tax took effect, according to the Illinois Gaming Board.
Still, Chicago predicted that its new tax would bring in $26.2 million annually, framing it as “progressive revenue” to balance budgets without cutting services or raising costs for working families. Yet opposition came rapidly.
The Sports Betting Alliance, which represents gaming giants like DraftKings, FanDuel, and BetMGM, filed suit in December 2025. It argued that only the state has constitutional authority to licence and tax online sports wagering.
Legislative countermeasures
The controversy has spurred further legislative action. Sen. Patrick Joyce (D-Essex) introduced Senate Bill 2760, which would penalise Chicago by deducting its sports wagering tax revenue from its share of the Local Government Distributive Fund and redistributing it to other municipalities. Joyce also filed Senate Bill 2800, echoing Didech’s proposal to block home-rule units from taxing sports wagering altogether.
Chicago Ald. Gilbert Villegas has warned that the tax risks deepening rifts between city and state lawmakers.
The road ahead
With lawsuits pending and bills advancing in both chambers, Illinois faces a pivotal moment in defining the balance of power between state and local governments over gambling revenue. The outcome will shape not only Chicago’s budget but also the broader future of sports betting regulation across the state.
Illinois’ sports betting tax ranks among the harshest in the country, with only a handful of states imposing comparable or higher rates. Nationally, tax structures vary widely—from single-digit levies in Iowa to rates above 50 percent in New York, as reported by several media outlets.
States with higher taxes often face lawsuits, reduced promotions, and migration to illegal markets—concerns now surfacing in Illinois. The state’s fight over municipal authority could set a precedent for others weighing local gambling taxes.
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