With the city of Chicago’s 10.25% sports betting recently taking effect on New Year’s Day, the Sports Betting Alliance filed a lawsuit this week to block it.
The SBA represents online betting operators like FanDuel, Draftkings, BetMGM, and others. The group is seeking a temporary restraining order against the tax, which is part of Mayor Brandon Johnson’s new budget. The mayor believes the sports betting tax could bring in an additional $26 million for the city, which faces a $1.2 billion shortfall.
Operators have threatened to leave the city if the tax goes into effect. They have also argued that the city doesn’t have a licensing or standards framework in place to regulate sports betting.
In the lawsuit, the SBA said the tax “represents an unconstitutional assertion of authority that rests exclusively with the state.”
Plan Could Impact State Revenue
The SBA further claims the tax was set to go in place just two weeks after the budget was approved. That didn’t allow for a “review framework, specify application criteria, set processing timelines, or identify enforcement mechanisms associated with the licensing process,” the lawsuit notes.
According to the suit, repercussions from the tax could include Windy City bettors seeking unregulated online wagering platforms.
The news comes as state legislators have also looked to curtail the city’s tax on the industry. The state has collected $365 million in tax revenue from the industry through October. Operators pulling out of the largest city in Illinois could result in a major hit for the state.
Sen. Patrick Joyce (D) has filed a bill that would strip the exact amount of state funding from the city that the tax would produce. Rep. Daniel Didech (D), who chairs the House Gaming Committee, has put forward a bill that would bar local jurisdictions from taxing, regulating, or imposing fees on gambling, which would include sports betting.
Growing Tax Burden
The industry is already heavily taxed by the state. Earlier this year, legislators added to the tax burden by imposing a 25-cent tax on every wager for the first 20 million bets, which then doubles beyond that threshold.
Some operators responded by passing the tax on to bettors via transaction fees and raising bet minimums. The Illinois Gaming Board later reported that the number of legal wagers dropped by five million in September.
Along with the per-wager levy signed into law this year, the state also hiked taxes on operators in 2024. They enacted a tiered scale which reaches up to a 40% tax rate.
