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REGULATION
A t the request of Governor JB Pritzker , the Illinois state legislature in May approved a significant increase in how and how much sports wagering operators are taxed in the state . The move came less than a year after Ohio ’ s governor , Mike DeWine , pushed through a doubling of the wagering tax rate in his state .
On the face of it , raising sports betting tax rates in US jurisdictions seems an easy way for a state to bring in more revenue . But stakeholders say Illinois consumers will likely be the recipients of unintended consequences . During the house budget debate , one Republican representative suggested an appropriations line for funds to treat the Democrats ’ “ unchecked spending addiction ”.
In Illinois , lawmakers got the tax hike approved as part of the FY2025 budget , rather than as a standalone bill . Politicians in other US jurisdictions , including Ohio last year , fold what might be unpopular issues into the budget , because it is then harder to oppose . It ’ s one thing , stakeholders say , to vote “ no ” to a single bill , but another thing entirely to hold up a state budget . In Washington , DC , the city council is using the same tactic to expand its gambling market .
The Illinois increase – up from 15 % – won ’ t benefit consumers . Operators will be taxed on a sliding scale , effective in July . The smallest operators will pay 20 % on adjusted gross revenue ( AGR ) and the biggest will pay 40 %.
“ Players are probably going to see fewer promotions and that is not good for the consumer ,” West Virginia lawmaker and government affairs chief for Play ’ n GO Shawn Fluharty told iGB . “ It could impact the lines and that is another negative for the consumer . And it could force some operators out , which means less choice , which is also bad for the consumer .”
COULD ILLINOIS ’ SPORTS BETTING TAX GRAB BACKFIRE ?
Illinois ’ general assembly made a money grab in May but gambling stakeholders are wary of the consequences . By Jill Dorson
INCREASE BIGGER THAN PRITZKER PROPOSED
The progressive tax rate idea surfaced at the 11th hour . Pritzker suggested a 35 % flat tax on AGR for all operators . But lawmakers did the governor one better , meaning that the two biggest operators in the state , DraftKings and FanDuel , will pay more than 35 % on AGR . It ’ s not clear if DraftKings and FanDuel – and any other company with AGR over $ 200m – will be taxed a flat 40 % or a blended rate , with lower taxes applied to AGR below $ 200m .
Will the first $ 30m of an operator ’ s AGR be taxed at 20 %? And then the subsequent amount between $ 30m and $ 50m be taxed at 25 %? If so , operators will pay a blended rate .
The senate amended and passed the house budget bill on 26 May . Two days later , the house concurred on a FY2025 budget that includes $ 700m (£ 549.7m /€ 645.1m ) in tax increases .
The budget that the general assembly sent to Pritzker includes a graduated wagering tax rate that is dependent on adjusted gross revenue . Here ’ s a look :
• 20 % tax on AGR up to $ 30m
• 25 % on AGR between $ 30m- $ 50m
• 30 % on AGR between $ 50m- $ 100m
• 35 % on AGR between $ 100m- $ 200m
• 40 % on AGR over $ 200m The proposal separates retail and digital AGR , meaning that any inperson bets with a sportsbook will be taxed separately from digital bets . In 2023 , no brick-and-mortar sportsbook
82 • ISSUE 136 • iGB L ! VE 2024