The state of Illinois shocked the betting world when it chose to change how it taxes sports betting. Those changes went into effect on July 1, 2024.
Now we finally have a full month of revenue reporting to know how it’s influencing the Illinois sports betting industry, and well, to no surprise — it’s been a boon to the state taxes, as was the intention from the get-go. Keep reading for the latest update on Illinois’ evolving gambling scene.
Revenues Down, But Taxes Up Anyway
The Illinois Gaming Board regulates the marketplace down there, and every few months, they release fresh data on the industry. Welp, we finally got the much-anticipated numbers for July. That month, total player spending was at $774.1 million. That number is probably to be expected since July is a quiet month for sports betting since only MLB is active.
July’s handle was down 8.7 percent compared to June — the last month of the old tax rules. Still, July was able to accrue more of a tax kickback due to the rule changes. The state earned 14.3 million in taxes. This was higher than in June, when it collected $13.8 in taxes.
Sports betting revenue for the month of July was $71.1 million. So that means once you take out the $13.8 million paid in taxes, sportsbook operators were left with $56.8 million in profit.
In case you need a refresher, Illinois previously had a flat tax on sports betting. It was a 15% take rate across the board. This is pretty in line with the vast majority of states across the United States legalized industry.
However, lawmakers passed a new progressive tax as part of the state’s brand-new budget for fiscal year 2025, which began that July. Replacing it is a sliding scale that differs from operator to operator. Still, the cheapest tax would start at 20 percent — more than the previous one. On the high end, the tax would escalate to 40 percent. Here is how the scale breaks down:
- 20% tax on gross revenue (not profits) up to $30 million
- 25% tax on gross revenue up to $30 million to $50 million
- 30% tax on gross revenue up to $50 million to $100 million
- 35% tax on gross revenue up to $100 million to $200 million
- 40% tax on gross revenue above $200 million
This applies to all sports betting revenue by the way — both retail and online sports betting. However, taxes apply separately to each. So for example, DraftKings would be in the 20% scale for its retail operation in Casino Queen. However, its online figures would be subject to the 40-percent bracket.
If it feels like a significant price hike, it’s because it is. On the high end, Illinois has the second-highest tax rate of any state with an open betting market. It’s behind only New York at 51 percent. New Hampshire also has a 51-percent tax, but they don’t have a free market (DraftKings has a monopoly there).
Speaking of DraftKings, they tried to punch back with a tax increase of their own. In August, the leading operator announced a surcharge tax that would affect players in high-tax states like Illinois and a few others. Every winning bet would be charged a “low- to mid-single digit percentage” — it would differ from state to state. This would’ve been a first-of-its-kind addition since no operator has done this.
However, it took all of two weeks for DraftKings to walk back on this. They canceled the idea — ironically on the same day that rival FanDuel announced its earnings and its plan to NOT follow DraftKings’ path with a player tax on winnings. Those two companies seem to work in lockstep so it feels like DraftKings’ decision was a direct response to its arch-rival.
More Illinois July Numbers Worth Reflecting On
More numbers were part of the Illinois Gaming Board’s latest report beyond just how the new tax is affecting the state. Here are a few more that caught our attention:
$753.6 million: That’s how much sports betting contributed to the state’s total revenue. That means the retail sportsbook revenue was a meager $20.5 million for the month of July. You can see why an operator like DraftKings would be peeved. Almost all of the state’s sports gambling activity is done via mobile betting apps so the small tax they get on their retail side makes no difference in the larger picture.
9.2 percent: This is the state’s hold for July, which was down from 11.2 percent in June. For those not in the know, the hold is the percentage of money that operators keep after paying back winnings. Anything above eight percent is generally good.
$28.6 million: This is how much FanDuel kept to themselves in the state of Illinois at the end of July. It was number one in the marketplace. DraftKings was second at $23.6 million. Both operators qualify for the highest tax bracket in the state with these numbers. Fanatics was a distant third at only $5.2 million.
We’ll be paying attention to Illinois now that football betting ramps up and we really see how this tax hike is affecting things.
