Illinois' new sports betting tax could hurt casual gamblers most
Add Axios as your preferred source to
see more of our stories on Google.
Illustration: Brendan Lynch/Axios
As football season nears, Chicago area sports bettors may be in for sticker shock.
The big picture: Illinois' new state budget includes a tax hike for online sports gaming — $0.25 for the first 20 million wagers, then $0.50 for every bet after that — which will impact big sites like FanDuel and DraftKings, and their customers.
Why it matters: FanDuel announced it will pass that tax onto consumers, instituting a $0.50 tax on every online wager come Sept. 1, just in time for football season, which generates the most sports betting revenue.
- DraftKings has signaled similar plans, but hasn't announced any hikes yet.
- Those are the only two online gaming sites to pass the 20 million wager mark in the state last year and generate close to 75% of the state's sports betting market.
Zoom in: Both sites have put down roots in Chicago, opening brick-and-mortar sports books at Wrigley Field and the United Center. Company leaders were initially outraged by the state's new tax and even suggested they could end their operations in Illinois.
- They've since backed away from that stance, instead opting to pass the tax directly to customers.
The intrigue: While online gaming is a multibillion-dollar industry, a large portion of the gamblers are casual users, placing smaller bets or running fantasy sports competitions.
What they're saying: "We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers," Flutter CEO Peter Jackson said in a statement. Flutter is the parent company of FanDuel.
- "We also believe the introduction of the Illinois Transaction Fee will likely motivate some Illinois-based customers to bet with unregulated operators. These operators do not contribute tax revenue to the state."
Flashback: Online gambling has exploded since states started legalizing it in 2018.
By the numbers: Since Illinois legalized it in 2020, over 1.3 billion individual bets have been placed, wagering over $48 billion, according to the Illinois Gaming Board.
- FanDuel made $491 million last year, while DraftKings made $418 million. Together, both companies paid over $200 million in taxes.
Yes, but: The state, which is facing budget deficits, wants more.
Context: This isn't the first time Illinois has dipped into sports gambling revenue. Just last year, they passed a graduated tax system that taxed sites up to 40% based on revenue. This new tax adds on top of that.
Between the lines: If sports gamblers leave these sites and use the black market, it would undermine the state's revenue goals.
- "Should the state reverse its decision at any point in the future, FanDuel will immediately remove the $0.50 transaction fee," Jackson said.
The bottom line: The state is betting big on grabbing more revenue, but it runs the risk of losing consumers who are accustomed to pocketing that cash.