The sports betting method of taxation to a progressive one based on operator revenue amounts starting with Fiscal Year 2025 beginning July 1.
sports betting revenue would be taxed at the same progressive rates, they would be taxed as separate entities.
This could be viewed as a small win for DraftKings, who are the most likely among the eight mobile operators in the state to reach $200 million in adjusted gross revenue that triggers the maximum 40% rate.
The first $30 million in AGR would be taxed at 20%; the next $20 million at 25%; revenue from $50 million to $100 million would be taxed at 30%; revenue from $100 million to $200 million at 35%; and all revenue above $200 million would be taxed at 40%.
The bill now heads to the House and would then go to Gov. JB Pritzker’s desk for his signature should it . Pritzker signed the original gaming expansion bill in June 2019 that legalized sports betting in Illinois, with the first bets placed days before the COVID-19 pandemic shuttered the country in March 2020.
His repeated live betting on mobile later that year via remote registration helped accelerate Illinois’ ascent in the marketplace, with the state occupying a top-three spot nationally for monthly handle.
If ed by the House, Illinois would become the first state to have a purely progressive tax rate for sports betting. Arkansas sportsbooks pay 13% in taxes until the licensee sures $150 million in total gaming revenue, and then the rate climbs to 20%.
Sports Betting Alliance criticizes age 2m224s
Statement on sports betting tax hike advancing out of the Illinois Senate tonight: pic.twitter.com/8x2ZuYXEk0
— Sports Betting Alliance (@SBAllianceUS) May 27, 2024
The splitting of the two sources of revenue will help some licensees pay less in taxes. Based on the last 12 months of available figures from the Illinois Gaming Board covering April 2023 through March, Rivers Casino generated $81.1 million in AGR through its sports betting app BetRivers, reaching the 30% tax rate.
But the nearly $12 million earned by Rivers Casino at its brick-and-mortar sportsbook would be taxed at only 20% as opposed to the 30% rate had they been combined, resulting in $1.2 million less in tax payments.
It would also help DraftKings at Casino Queen, which would have paid 40% in taxes on its $7 million in winnings compared to the 20% the amendment allows, a difference of $1.4 million. Additionally, DraftKings began taking bets at its sportsbook adjacent to Wrigley Field in March, which should also provide at least a seven-figure revenue haul over the course of 12 months.
Pritzker originally called to more than double the state’s current 15% tax rate to 35% in February when he unveiled the $52.7 billion budget. Based on the last 12 months of mobile operator winnings, the progressive tax rate method would have generated $174.5 million more in tax revenue than the current 15% levy. That total comes within shouting distance of the $200 million Pritzker’s budget estimated with the flat rate increase originally proposed.
| Licensee | Adjusted Gross Revenue | Tax Revenue Based on Current 15% Rate | Tax Revenue Based on Progressive Tax | Difference in Tax Revenue |
|---|---|---|---|---|
| Fairmount Park (FanDuel) | $421,303,337 | $63,195,501 | $149,521,335 | $86,325,834 |
| Casino Queen (DraftKings) | $349,964,506 | $52,494,676 | $120,985,802 | $68,491,126 |
| Midwest Gaming & Entertainment (BetRivers) | $81,108,012 | $12,166,202 | $20,332,404 | $8,166,202 |
| Hawthorne Race Course (Fanatics Sportsbook) | $51,660,443 | $7,749,066 | $11,498,133 | $3,749,067 |
| Par-A-Dice Gaming (BetMGM) | $43,967,447 | $6,595,117 | $9,491,862 | $2,896,745 |
| Hollywood Casino Aurora (ESPN BET) | $42,433,389 | $6,365,008 | $9,108,347 | $2,743,339 |
| Elgin Riverboat Resort (Caesars Sportsbook) | $36,148,114 | $5,422,217 | $7,537,029 | $2,114,812 |
| Full House Resorts (Circa Sports) | $880,086 | $132,013 | $176,017 | $44,004 |
| TOTALS | $1,027,465,334 | $154,119,800 | $328,650,929 | $174,531,129 |
The source of the additional tax revenue though, overwhelmingly falls on FanDuel and DraftKings, the two biggest operators in the Land of Lincoln. The pair would be paying $154.8 million of those additional tax monies, with both seeing their effective tax rates more than double thanks to having $371.3 million of their combined $771.3 million in winnings taxed at the maximum 40% rate.
FanDuel’s effective tax rate based on its past 12 months of winnings would be 35.5%, while DraftKings would face a 34.6% levy. Both online titans still paid staggeringly more in taxes in promotional credits and bonuses.
FanDuel paid $415.7 million in taxes on $815.1 million in winnings for the 2023 calendar year, while DraftKings sent $291.6 million to state coffers after claiming $571.8 million in revenue.
The effective tax rate for the two in Illinois should the progressive rates would be notably higher than in Pennsylvania, where the state tax rate is 34% with promotional deductions allowed.
FanDuel faced an effective tax rate of 24.5% there last year with $78.8 million worth of levies from close to $322 million in gross revenue, while DraftKings had a 23.3% rate while shipping $40.5 million of its $173.6 million in winnings to the state.
