Sports betting tax becomes battleground between Chicago and state lawmakers

CHICAGO, Ill. (Capitol News Illinois) — Chicago’s steep new tax on sports betting is creating a backlash in Springfield that could lead to new restrictions on whether municipalities should have the power to tax gambling revenue.

The highly contested tax charges sports betting businesses 10.25% on their net gambling revenue. The tax, which took effect Jan. 1, is in addition to the state’s existing levy on sports gambling, which includes per-bet fees. The combination gives Illinois one of the most severe betting tax structures in the country.

As Illinois begins Problem Gambling Awareness Month, state representatives from both sides of the aisle say the tax will drive bettors to illegal markets, hurting revenues for Illinois. And some Chicago officials worry it could become a point of tension between the city and state legislators, hindering future collaboration on financial issues.

“When we passed our sports betting law, it was never the intent of the legislature that there would be a patchwork of different rules and different tax rates in every municipality throughout the state,” Rep. Daniel Didech, D-Buffalo Grove, told Capitol News Illinois. “Now that Chicago has opened that door, I think we’re going to try to close it.”

Didech, who serves as chairman of the Illinois House Gaming Committee and played poker professionally for over five years, filed House Bill 4171 in October with a long list of Democratic and Republican cosponsors. It passed committee in February, taking it one step closer to a vote.

The bill would negate Chicago’s tax and would be effective immediately if passed and signed into law. Didech said it was intended to maintain uniform, statewide regulations on sports gambling by preventing local governments from imposing their own taxes.

The Sports Wagering Act was passed in 2019, and the state raked in $429 million in tax revenues related to sports gambling in fiscal year 2025, according to the Commission on Government Forecasting and Accountability.

Illinois’ tax structure

Currently, Illinois ranks fifth in the U.S. and first in the Midwest in taxes collected on sports wagering, according to the Illinois Policy Institute.

When sports betting became legal in the state, sportsbooks paid only a flat 15% tax on the revenue they earned. Now the tax rate is as high as 40% depending on a sportsbook’s revenue, while the state also enacted a 25- to 50-cent per-wager fee last year.

But the most recent data from the Illinois Gaming Board shows that the total number of bets placed fell by 15% from September to October last year after the per-wager tax was introduced.

Chicago identified the sports betting tax as a stream of “progressive revenue” in its 2026 Budget Overview, claiming it would help balance the budget without cutting essential services or raising costs for working families. The tax was passed on June 1, 2025, and city officials projected the measure would generate $26.2 million.

But the new city tax amplified growing tensions between Chicago and the Sports Betting Alliance, which represents major sportsbooks including DraftKings, FanDuel and BetMGM.

The Alliance filed a lawsuit in December challenging the tax. The coalition argued that the Sports Wagering Act did not allow the city to impose its own sports betting taxes on top of the state’s existing taxes.

“The State — not the City — has sole authority to license and tax online sports wagering in the State of Illinois,” the lawsuit argued. “The Illinois Constitution reserves authority over licensing for revenue and income-based taxation to the State unless expressly delegated. The Illinois General Assembly has never authorized the City to impose licensing fees or income-based taxes on online sports wagering.”

The city declined to comment, citing pending litigation.

A hearing is scheduled later this month. “Ultimately, we just have to continue to press the case,” Alliance president Joe Maloney said.

Chicago and Springfield at odds

In the meantime, state lawmakers are taking aim at Chicago’s tax — and trying to prevent other municipalities from setting their own local sports betting taxes.

Sen. Patrick Joyce, D-Essex, filed Senate Bill 2760 in January, which seeks to penalize Chicago by taking the total amount the city gained from its sports wagering fee and deducting it from Chicago’s share of the Local Government Distributive Fund, one of the largest sources of state funding for cities and counties. That amount would then be redistributed to other municipalities following the fund’s allocation formula.

Joyce said in an interview that he, along with other members of the General Assembly, was open to sitting down with Chicago officials to discuss the bill.

He also filed Senate Bill 2800, a bill identical to Didech’s House version that denies home rule units the authority to regulate or tax sports wagering.

The tax remains a divisive topic in Chicago, too.

Chicago Ald. Gilbert Villegas, who opposed the new tax, said he was concerned it would cause a rift between the city and state lawmakers.

“I just think it was the wrong approach,” he said. “To do this with Springfield signaling that there was going to be huge opposition and a potential bill sends the wrong message from a city that is going to need to be down in Springfield making requests for different items.”

What does the tax mean for bettors?

Sportsbook operators have already been feeling the squeeze after the implementation of the state’s per-wager tax in September, which required them to pay 25 cents on each of the first 20 million bets placed, and 50 cents for each bet over that amount.

Some betting operators, like FanDuel, have shifted the cost to customers by forcing them to pay a $0.50 per-bet fee. Other sportsbooks like BetRivers have responded to Illinois’ tax pressures by raising the minimum stake. The number of total bets placed in Illinois fell to 28.5 million in the fall from 33.6 million the year before.

Both the Sports Betting Alliance and state lawmakers worried that the city’s tax would drive Chicago bettors away from licensed sportsbooks and into illegal, unregulated markets.

But some avid sportsbook users, like Chicago-based social media content creator Sam Cantalupo, are continuing to stomach the cost.

Cantalupo is known for his sports betting analysis videos, which have garnered over 100,000 likes on his TikTok channel “djsammycaps.” While he has signed petitions opposing the city’s sports betting tax, he said that, at the end of the day, he is still willing to pay a higher price if an even heftier tax were imposed.

“If they raised it, honestly, I would probably have to suck it up and pay it,” he said.

Erika Tulfo is a graduate student in journalism with Northwestern University’s Medill School of Journalism, Media and Integrated Marketing Communications, and is a fellow in its Medill Illinois News Bureau working in partnership with Capitol News Illinois.

Capitol News Illinois is a nonprofit, nonpartisan news service that distributes state government coverage to hundreds of news outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation.

This article first appeared on Capitol News Illinois and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.