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Sports betting experts have been all over the new Illinois’ tax-rate hike. We have been too, but the new bill also has other far-reaching impacts and as our headline hints, it affects collegiate betting. Yet, almost no one is talking about this. Here’s what users of Illinois betting apps need to know about how they’re affected once this bill comes into effect:
College Betting Ban Begins On July 1
Earlier this June, Illinois Governor J.B. Pritzker signed into law Public Act 103-0592. However, it doesn’t go into effect until July 1, 2024 — which is right around the corner. On that fateful day, college betting will be struck from the Illinois sports betting scene completely.
Here’s the major caveat though, this is strictly a ban on Illinois-based athletic programs, not national ones. So local bettors will be barred from putting money on in-state teams like the Fighting Illini (Illinois) or the Redbirds (Illinois State) or the Ramblers (Loyola Chicago), for instance. They’ll still be able to wager on, say, Alabama football or UConn basketball.
This is a complete ban too. Previously, betting on Illinois college sports was heavily restricted in-state. For instance, no prop bets were available on individual player performances. None! Only “classic” wagers — point spreads, the moneyline, or point total over/unders — were accepted and even then, they had to be done in person at a sportsbook, not through an app.
However, those heavy restrictions were increased to outright bans with this latest bill. That leaves operators with a little less in their pockets. However, the tax component of the bill is where operators are really, really hurting as we’re about to explain.
Increased Tax Rate Also Part Of Public Act 103-0592
Maybe you’ve heard of this new Illinois tax hike, which also goes into effect on the first of July. However, most don’t realize it’s a tiered tax rate — not a one-size-fits-all increase. That’s right, it’s a progressive tax and it applies to the operator’s gross sports wagering receipts. Here are the brand-new rates at a glance:
- 20% of annual AGSWR up to and including $30 million;
- 25% of annual AGSWR in excess of $30 million but not to exceed $50 million
- 30% of annual AGSWR in excess of $50 million but not to exceed $100 million
- 35% of annual AGSWR in excess of $100 million but not to exceed $200 million
- 40% of annual AGSWR in excess of $200 million
This is significant for two reasons. One, it’s a huge step-up from the previous tax rate of 15 percent flat. As you can see, it’s more than double for mid-tier performers and almost three times as high for the top-end-performing operators. Speaking of which, we have data on which operators fall where on the tax scale.
Using 2023 data, Caesars, ESPN BET, and BetMGM would be bucketed into the 25 percent tax bracket. The 30 percent group is reserved for BetRivers and Fanatics Sportsbook. The market leaders, FanDuel and DraftKings, would hit the 40% rate.
The second reason this is important is that Illinois now has one of the highest tax rates in the country. New York and its 51 percent rate is higher, of course, but the Empire State does have a premium due to New York City’s presence (sorry, Chicago, you’re not at that level yet). The concern here, especially for operators, is that Illinois “opened the floodgates” to other states hiking their own tax rates on wagering. Both FanDuel and DraftKings saw their stock price plummet double digits right after the news broke.
Last year, these companies combined for nearly $750 in profits inside the state of Illinois. FanDuel led the way with profits of $411 million, while DraftKings followed at $319 million. Those numbers will be slashed by nine figures this year due to the new bill, which obviously doesn’t sit right with them. Sure, they can offset those losses with decreased advertising spend, but it’s still a shaky situation.
Contagion Fears Only Fears At The Moment
Here’s a glimmer of hope for sportsbook operators: the state of Massachusetts voted no against its own sports betting tax hike. Senator John Keenan proposed Amendment 828, which would’ve raised the state’s current tax rate on wagering from 20 percent to 51 percent like New York. However, the Massachusetts Senate overwhelmingly rejected the proposal. Perhaps the fact that DraftKings is headquartered in the state played a factor, but we’re only speculating.
New Jersey recently proposed a new budget, which surprise, includes tax hikes for next year. However, those increases were NOT off a new sports betting tax. That’s a relief given New Jersey’s sports betting scene opened the floodgates for other states due to its Supreme Court case in 2018.
Personally, we are highly skeptical of governments. Call us libertarians, call us anarchists, but governments have continually shown us they’ve never met a tax they don’t like. And with budget deficits still common after the pandemic, increasing taxes is an easy way to balance the books per se. We expect more tax hikes, maybe not in the 40 to 51 percent level, but still higher than now.
We’ll be monitoring this situation closely. Be sure to routinely check back to see what’s happening across the U.S. betting landscape.
