June 2 (UPI) — Illinois legislators have approved a new state budget that raises taxes on legal sports wagers, causing betting stocks to decline Monday.
On Sunday, the state’s Senate and House passed a $55 billion budget with $800 million in tax increases, including sports betting. Illinois Gov. J.B. Pritzker said he would sign the bill.
Illinois officials hope to raise more than $36 million in yearly revenue with a per-wager tax on sports bets placed within the state, according to Casino Beats. The new tax takes effect July 1, with the money going into the state’s General Revenue Fund.
Online and in-person sportsbooks are run by FanDuel, DraftKings, Caesars, BetMGM and ESPN BET. Betters 21 years of age and older must be physically located within Illinois state lines. Many casinos and racetracks have partnered with sportsbook operators.
Last year, Illinois sportsbooks paid $276 million in taxes, according to an LSR analysis, including FanDuel $74 million and DraftKings $67.9 million.
Of the more than 370 million bets in Illinois last year, DraftKings and FanDuel took in more than 150 million bets each.
The new law imposes a new tax of 25 cents per wager on the first 20 million online sports bets made each fiscal year, rising to 50 cents per bet afterward. In 2024, the state went to a tiered 20% to 40% rate from 15%.
DraftKings and FanDuel should “certainly” surpass 20 million wagers, meaning they’ll face the higher tax rate, Truist analyst Barry Jonas told CNBC. Jonas said Illinois’ rate will be among the highest in the nation.
DraftKings’ stock price declined 7.44% on Monday afternoon on NASDAQ, and Flutter Entertainment, which runs FanDuel, declined 2.44% on the New York Stock Exchange. Roundhill Sports Betting & iGaming Exchange Trading Fund dropped 1.7% on the NYSE.
Smaller competitors in the market also declined. MGM Resorts, which owns BetGM platform in a 50-50 relationship with Entain, went down 1.9% on the NYSE. Penn Entertainment, which partners with Entain, dropped 0.78% on NASDAQ.
Twenty-seven states and the District of Columbia allow online sports betting statewide.
The Sports Betting Alliance, which includes DraftKings and Fan Duel, said it will “will fight this discriminatory tax alongside our customers.”
The SBA said: “For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market,” the SBA statement reads.
Dan Katz, known as “Big Cat” of Barstool Sports, which is sponsored by DraftKings, said in a video that the new tax would be “very bad.”
Robert Walker, who for more than a decade was the sportsbook director for MGM Mirage’s Las Vegas casinos, said legalized sports betting is facing competitors in the form of companies like Kalshi that offer sports “prediction” markets.
“Make no mistake: This cost will ultimately land squarely on the customer,” Walker, director of operations at ARMS, which helps retail sportsbooks manage potential risks to their business, told Front Office Sports. “The tax may be levied on the operator, but basic economics tells us who really pays. What’s particularly frustrating is how this undermines the competitive position of regulated operators just when they need every advantage they can get against emerging alternatives.”
Other states with taxes include 51% in New Hampshire, New York and Rhode Island with 6.75% in states that include Nevada and Iowa, according to a report from the Tax Foundation.
Maryland Gov. Wes Moore signed a budget that includes a 5 percentage point increase to the sports betting tax. An Ohio legislator introduced a 2% handle tax on top of the existing 20% tax on revenue.
DraftKings and FanDuel initially offered daily fantasy sports services nationwide.
With sports betting approved by the U.S. Supreme Court in May 2018, they expanded into online and retail sportsbooks. It struck down the Professional and Amateur Sports Protection Act of 1992
DraftKings, which was established in 2012 and based in Boston, had revenue of $4.77 billion in 2024.
FanDuel, which is based in New York City and was established in 2009, has revenue of $5.79 billion in 2024.
Pro leagues initially shied away from sports gambling companies. DraftKings and FanDuel have partnerships with teams in the NFL, NBA, NHL, MLB and WNBA.
