Could a Betting Tax Hike in Illinois Trigger the Same in Other States?

Lawmakers in Illinois passed a new bill that will increase the sports betting tax. The consultancy firm B Global warns that this bill will pave the way for other states to follow. The tax rate originally was 15%, but under the new policy, sports betting will rise to a sharp 40% increase.

What the New Structure Looks Like

The new structure that passed in the Illinois House of Representatives may become a catalyst for changes across the nation to sports betting and how they tax it. Looking at the new structure, the rates range from 20% to 40%, depending on your adjusted gaming revenue. An operator that earns $200 million will need to pay 40% in sports betting tax. The passed bill would make this the second-highest tax in the nation behind New York, which has a sports betting tax of 51%.

After it passed with the Illinois House of Representatives, the new proposal was sent for signing off on from Illinois Governor JB Pritzker. The bill forms part of the FY2025 budget. Governor Pritzker signed off on the $53.1 billion bill, and the tax will take effect on July 1.

What Could Happen from This Bill

The biggest effect of the bill could be a knock-on effect, where other states may consider passing similar tax bills. This could alarm investors because it will make the gaming industry less profitable. Massachusetts is another state that has considered hiking its tax rate on gaming operators, but the idea was quickly shot down because many said it was unlikely to pass.

Seeing it pass in Illinois could make them try to pass it again. They also talked about tax hikes in New Jersey for gaming operators, and Pennsylvania is another state for that possibility.

Going After the Most Profitable Operators

Brendan Bussman from B Global says that the tax hikes punish the most profitable businesses and harshly criticizes Illinois for passing the bill. He says that this targets companies that already pay their fair share in revenue to the state. Pushing up the taxes could negatively impact the overall sports betting market.

The reason behind this is that when operators need to pay more in taxes, they can't offer the same lucrative welcome bonuses and promotions that they did before. Ultimately, this hurts the customer. He finished by saying that this new tax rate will benefit offshore betting operators because they don't pay taxes. The final worry that Bussman has is that the states that haven't legalized sports betting will now legalize it with higher tax rates. For example, Minnesota, California and Texas have not yet legalized sports betting, and they may try to pass it with higher tax rates from the start.

Conclusion

Regardless of how it impacts the sports betting industry, no one can deny that it will generate more revenue for the state. Sportsbooks like Fanatics, DraftKings, BetMGM and FanDuel voiced strong opposition to the bill, but it passed regardless. Pritzker's signature on the bill makes this the first state to have a progressive tax directly on sports betting.