New Illinois Sports Betting Tax Set to Debut on Tuesday

One of the most critical battles in the US sports betting industry will kick off tomorrow in Illinois.

The state is set to debut a controversial new tax on each bet accepted by online sportsbooks. It requires operators to pay either $0.25 or $0.50 per wager, depending on the number of wagers they have received. The Sports Betting Alliance has been vocal in its opposition to the tax, but lawmakers are set to defy them and begin a battle that will have a national impact.

The Land of Lincoln will be the first state to add a tax on each wager placed.

DraftKings, FanDuel Set to Push Back

FanDuel and DraftKings didn’t waste time before responding to the new tax being approved by lawmakers. The industry leaders announced a per-bet fee for all wagers, passing the cost directly to Illinois bettors. The operators claim this fee would be dropped if the state decides to eliminate the tax.

No other Illinois online sportsbook has announced a similar fee, but that could change once the tax goes into effect. With the state raising taxes just one year ago, operators could be swayed to join FanDuel and DraftKings if they don’t see their market shares increase. This would increase pressure on lawmakers and make other states think twice before following Illinois’ lead.

How Will Bettors Respond?

While only two sportsbooks will be adding per-bet fees, they account for the vast majority of the market share in Illinois. That means most sports bettors in the state will be directly affected starting tomorrow.

This battle between lawmakers and sportsbooks will likely be decided based on how those bettors respond. If they choose to try other platforms, it would likely force FanDuel and DraftKings to drop their new fees to avoid losing even more revenue. If they decide to stop or limit their betting, it could prompt the state to reduce or eliminate the tax to preserve the tax revenue generated by the thriving market. 

Battle Opens Door for Prediction Markets

While lawmakers and sportsbooks are focused on fighting each other, there is a very real chance both sides will lose.

With taxes and fees making betting more expensive in Illinois, it opens the door for the expansion of controversial sports prediction markets. The industry uses a legal loophole to offer unregulated sports betting through trading platforms. While 36 states recently expressed opposition to these markets being available within their borders, it seems the White House is focused on protecting the industry.

Prediction markets will offer Illinois bettors a cheaper alternative, resulting in substantial and long-term revenue losses for the state and its sportsbooks.