Illinois Boosts Taxes on Sports Wagering Once More, Significant Impact Expected for DraftKings and FanDuel
Posted on: June 2, 2025, 1:00 AM
Last Updated on: June 2, 2025, 1:50 AM
@etfgodfather Todd Shriber Read More Financial Gaming Business Mergers and AcquisitionsGov. J.B. Pritzker (D) slaps a 25-cent tax on betting operators’ initial 20 million wagers, with the rate doubling to 50 cents on subsequent bets
The recently approved budget in Illinois contains a hidden gem: a sports betting tax hike, seemingly the second in a year. A novelty floated by Gov. Pritzker's office levies 25 cents on each wager for the first 20 million booked bets, which escalates to a whopping 50 cents per bet for any stakes placed thereafter. Given the 'graduated tax' plan implemented last year in the state, the big fish, like Flutter Entertainment’s (NYSE: FLUT) FanDuel and DraftKings (NASDAQ: DKNG), will bear the brunt of this new scheme.
On Sunday, Truist Securities analyst Barry Jonas gave his two cents, elaborating on the potential repercussions. Over the trailing 12-month (April 24, 2024, to March 25, 2025), it's reported FanDuel and DraftKings clocked 164 million and 146 million bets in Illinois, respectively. In this scenario, FanDuel would have shelled out an extra ~$77M, and DKNG would've parted with nearly $68M (full-year impact).
As for other publicly traded or affiliated players in the market, BetMGM and Chicago-based Rush Street Interactive (NYSE: RSI) could endure financial losses of approximately $4M and $3.25M, respectively, according to the Truist analyst. Estimates predict the new levy will create $36 million in new income for the state.
Ace Up the Sleeve for DraftKings and FanDuel in Illinois
Jonas lays out several tactics that FanDuel and DraftKings could employ in Illinois to fight against the new tax burden, such as:
- Minimum Bet Sizes: Based on last year's attempt by DraftKings to enact minimum bet sizes in high-tax states, this strategy might not be popular among competitors. So, they might need to tread carefully.
- Surcharges: As a fallback, the betting giants might pass the extra costs onto betters in the form of surcharges. However, this move could invite bad press and draw opposition from rival operators.
- Prediction Market Companies: The new Illinois sports betting tax could encourage customers to migrate towards prediction market firms like Kalshi. However, these platforms don't currently possess parlay menus, which are essential to the popularity of online sportsbooks like FanDuel, DraftKings, and more.
On the flip side, if Kalshi and its brethren carve out market share in Illinois, it could highlight the advantage they enjoy by operating without gaming licenses. This is not lost on Illinois, which joined the ranks of states sending cease-and-desist letters to Kalshi.
Jonas remarks that the latest sports betting tax increase in Illinois could ease the way for iGaming legislation in the future.
Pritzker's Fiscal Responsibility: Long Way to True Stability
Proudly proclaiming that the budget signifies fiscal responsibility, Pritzker appears oblivious to the fact that "responsibility" and "stability" are not always synonymous. U.S. News & World Report ranks Illinois 50th in terms of fiscal stability - 50th in long-term stability and 41st in short-term stability.
For the fiscal year 2026, the governor's office projects a deficit of $3.2 billion, which is expected to balloon to $4.1 billion in the next fiscal year and reach $5 billion in fiscal 2028.
Since Pritzker assumed office in January 2019, Illinois has raised taxes a whopping 50 times, and the state's budget has swelled by an impressive $16.7 billion, according to Illinois Policy. Additionally, Pritzker's latest budget allocates $13 billion for public pension recipients while slashing funding by $5 billion to keep the system financially sustainable for future retirees. Struggling municipalities in the state are already relying on the gaming industry to bolster their dwindling public pension funds.
- The new sports betting tax in Illinois, which doubles for subsequent bets, could result in significant financial losses for betting operators like FanDuel and DraftKings, amounting to an estimated additional $77 million and $68 million, respectively.
- Apart from FanDuel and DraftKings, betting companies such as BetMGM and Rush Street Interactive may also face financial losses of approximately $4 million and $3.25 million, respectively, due to the new tax.
- In response to the increased tax burden, DraftKings and FanDuel might consider implementing minimum bet sizes, surcharges, or encouraging customers to shift towards prediction market companies like Kalshi, which do not currently offer parlay menus.
- The sports betting tax increase in Illinois could potentially pave the way for future iGaming legislation and highlight the advantages enjoyed by prediction market firms that operate without gaming licenses, prompting Illinois to send cease-and-desist letters to such companies.
