Are U.S. Governors Savaging Online Gambling Operators for Tax Revenue?

In New York, mobile sports betting operators are required to secure the proper licensing based on the sports betting legislation that was passed in 2021. After paying an exorbitant license fee, they are then required to pay taxes on gross revenue to the tune of 51%. That is by far the largest applicable gambling revenue tax rate in the U.S. with most states settling in at between 10% and 15%.

It's noteworthy that sports betting was approved in Illinois when Gov. Pritzker signed the appropriate legislation in 2019. It wasn't until 2021 that sports betting was formally launched amid the COVID-19 pandemic. At that time and currently, the applicable tax rate sits at 15% of gross revenue.

It's no secret that the primary motivation for passing online gambling legislation by legislators in most states is the promise of much-needed tax revenue. It appears that some states are no longer satisfied with the original legislation that was passed and are seeking to up the ante.

Illinois Governor Proposes Raising Sports Betting Tax Rate

With illegal immigration and inflation putting an enormous strain on the state's finances in Illinois, state leaders are looking for ways to soften the blow a little. It turns out that Illinois Governor JB Pritzker is looking to businesses like online gambling operators to help bail the state out.

After operating at a deficit for the last several years, Gov. Pritzker wants has create a $52.7 billion state spending plan to cover the fiscal year ending on June 30, 2025. If he can get that budget passed, the state would likely end up in the black for the first time in a long time.

As part of his budget proposal, Gov. Prtizker is seeking to have the tax rate on gambling operations raised from 15% to 35%. That's a significant increase, considering it would put Illinois' gambling revenue tax rate at the fourth highest level in the nation. In addition to increasing the tax rate, he would also like to cap certain deductions that operators can use to offset revenue.

In an explanation that he provided to the Associated Press, the Governor stated:

"I wish we had big surpluses to work with this year to take on every one of the very real challenges we face. It’s important to note that while this budget is tight this year, our fiscal house is in order, and we are able to keep our commitments to the people of Illinois.”

A look at the Current Numbers

To gain a better understanding of what the 35% tax rate might mean to the state of Illinois, a look at Illinois sports betting handle over the last 4 months of last year seems in order:

• September 2023 - $1.08 billion


• October 2023 - $1.1 billion


• November 2023 - $1.4 billion (record month)


• December 2023 - $1.3 billion