New Per-Wager Tax In Illinois Could Change Sports Betting Landscape Nationwide

Sports betting has proven a significant revenue generator for states across the US, and states like Illinois continue to find ways to increase their incoming tax flows. 

Lawmakers from the Land of Lincoln passed a $55 billion budget that will generate an additional $800 million in annual taxes, part of which will come from a new Illinois sports betting tax that will charge operators based on the number of wagers they accept. 

The new tax will charge operators 25 cents per wager for their first 20 million bets accepted annually and 50 cents for each wager thereafter. It is the first of its kind, potentially setting a precedent for other states to follow in future legislative sessions.

Two tax increases in two years

The hike marks the second Illinois sports betting tax increase in as many years. 

Last year, lawmakers instituted a tiered system that taxed operators between 20% and 40%, depending on their revenue. Every operator saw their tax bill go up from the 15% tax rate that was in effect since sports betting became legal in March 2020.

That resulted in some operators paying more than double the previous year’s taxes to the state. 

The law took effect on July 1, 2024, and it immediately showed its significance. Illinois generated $276 million in sports betting taxes in 2024 from $1.2 billion in revenue, compared to $161 million in taxes from $1 billion in revenue in 2023.

In other words, annual sports betting revenue grew by 20%, and taxes grew by 71% despite the law only playing a role for the year’s second half. 

Now, that number will grow again. According to a LegalSportsReport analysis, the new Illinois sports betting tax would have resulted in another $159 million for the state last year.

If Illinois sports betting continues to grow at the same trajectory, the state could receive more than $500 million in taxes in 2025. 

Tax disproportionately targets FanDuel, DraftKings

Last year’s tax increase hit the state’s two largest operators, FanDuel and DraftKings, the hardest. 

The two sportsbooks combined for well over half of the state’s $1.2 billion in total revenue, which made them the only two within the 40% tax bracket enforced after an operator reports $200 million in annual revenue.

Unless the landscape changes drastically, they will now become the only two operators to hit the 20-million-wager threshold that would make them pay the state an additional 50 cents per wager. 

The news caused both companies’ stocks to drop multiple percentage points. 

Furthermore, Truist analyst Barry Jonas estimates this will cost FanDuel an additional $77 million annually and DraftKings $68 million, a year after both operators’ revenue tax effectively more than doubled. The projected hit to their bottom lines will ultimately reflect their products in the form of worse odds, fewer promotions or minimum bet thresholds.

Citizens analyst Jordan Bender added that the new tax seemed “designed to hurt those two companies more than the mid-scale competitors.” Compared to hits in the mid-eight figures for FanDuel and DraftKings, the new tax will cost operators like BetMGM, Fanatics and BetRivers less than $5 million.

SBA, analyst express tax concerns

The Sports Betting Alliance, which includes FanDuel, DraftKings, BetMGM and Fanatics Sportsbooks, released a statement that 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 statement went on to call the tax increase “discriminatory, punitive and constitutionally suspect.”

It further said the tax will ultimately be passed onto the customer, which disproportionately penalizes recreational bettors placing small wagers, especially those of only $1 or $2. Such conditions could threaten the stability of the Illinois sports betting economy and drive bettors to black market sites.

Jonas added concerns about such taxes affecting bettors nationwide if more states pass similar legislation.

“We fear other states could look to copy Illinois,” Jonas said. “Illinois has essentially copied New York and New Hampshire, and this could embolden more aggressive fiscal policies elsewhere.”

iGaming the next frontier

While Illinois has raised sports betting taxes twice, the state remains on the sidelines for iGaming. Lawmakers in the House and Senate filed online casino bills during the 2025 legislative session, but neither advanced beyond their first committee readings.

Online casinos routinely generate higher tax revenue than online sports betting in states where both are legal. Projections estimate that Illinois online casinos could generate another $800 million in annual tax revenue, roughly triple what the state brought in from sports betting in 2024. 

Eventually, states will hit their limits on sports betting taxes and need to explore additional sources of revenue.

“We still view iGaming as the next move for budget-challenged states,” said Bender. At least six other states filed online casino proposals in 2025: Indiana, Maryland, Massachusetts, New Hampshire, New York and Virginia.