Don't Mess With Taxes

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Since the U.S. Supreme Court’s 2018 ruling that opened states’ doors to legalized sports betting, gambling has become an accepted part of major league sports.

All the United States’ professional athletic leagues have embraced partnerships with sports betting companies and casinos. This year, Major League Baseball (MLB) cleared the way for deceased players who had been permanently banned, including some who gambled on their sport’s games, to potentially get into the Baseball Hall of Fame.

Even the National Collegiate Athletic Association (NCAA), the governing body of student athletes and sporting events, reportedly is considering removing its ban on pro sports betting.

There’s a simple reason for all these pro-wagering moves. Money.

Gambling pays off for states: Cold, hard cash also is why sports betting is legal in 38 states and Washington, D.C.

In 2023 fiscal year 2023, states collected more than $1.8 billion in tax revenue from sports betting, according to a Tax Foundation study. The American Gaming Association reports that legal sports gambling operations generated a record $10.92 billion in revenue in 2023.

States tax sports betting revenue at varying rates, from as low as 6.75 percent in Nevada and Iowa to as high as 51 percent in places like the District of Columbia, New Hampshire, New York, and Rhode Island, according the National Conference of State Legislatures.

Now, Illinois is climbing up the sports betting tax rate ladder.

Illinois’ new per-wager state tax: The state legislature approved a $55.2 billion budget just before midnight (local time) Saturday, May 31, the last day of the 2025 legislative session.

The spending measure has more than $1 billion in new taxes and revenue changes, including a new sports betting tax. Illinois’ Democratic Gov. J.B. Pritzker has said he would sign the bill.

This is the second straight year Prairie State lawmakers have approved a budget hiking taxes on regulated sportsbooks.

In May 2024, Illinois approved a progressive wagering tax increase that changed the sports betting tax from a flat 15 percent rate to a graduated tax system based on annual adjusted gross sports wagering receipts (AGSWR), meaning larger sportsbooks pay higher taxes.

The state’s privilege tax on a master sports wagering licensee’s annual adjusted gross sports wagering receipts (AGSWR) on July 1, 2024, went to — 

• 20 percent for annual revenue of $0 to $30 million;
• 25 percent for those generating $30 to $50 million;
• 30 percent for those with revenue between $50 million and $100 million;
• 35 percent  for operators with annual revenue of $100 million to $200 million; and
• 40 percent for those with annual revenue exceeding $200 million.

The 2025 budget's tax, which will go into effect July 1, will add 25 cents for every bet for a licensee’s first 20 million bets, and 50 cents per bet thereafter.

Illinois officials project that the per-wager tax on sports bets placed within the state will bring in more than $36 million a year.

Wagering operators and bettors alike will pay: Gambling industry experts say the tax increase likely will prompt sportsbooks to raise their minimum bet requirements.

Yes, as with tariffs, increased costs in the wagering world get passed along to consumers, so Illinois bettors are the ones who will ultimately feel the tax.

They've already have been warned, but not by their public officials. Front Office Sports reported that Illinois residents who logged on to their betting apps on Saturday before the bill was finalized “were met with an uncommon warning: the state legislature was considering new taxes.”

The Sports Betting Alliance also issued a statement calling the sports betting tax “discriminatory, punitive and constitutionally suspect.”

“With this change, lawmakers are essentially urging customers — and especially these small dollar bettors — to switch to unsafe and unregulated sportsbooks who defy state consumer protections and generate zero taxes for state priorities. These illegal operators are the big winners from Saturday’s vote,” added the Arlington, Virginia-based nonprofit coalition of legal sports betting platforms and stakeholders.

The one bit of good news for Illinois bettors is that the National Basketball Association (NBA) championship finals, even if the series goes seven games, will wrap up on June 22, just before the new gambling tax takes effect.

You also might find these items of interest:

• IRS missing $1.4 billion in tax due from unreported gambling winnings
• 15%-to-25% tax rate range is part of proposed internet gambling template
• Are you ready for some football bets? Be sure to report your winnings on your tax return

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