Sportsbooks Question How Illinois Will Tax New Surcharge Fees

The tensions between sportsbooks and lawmakers may soon boil over in the Land of Lincoln.

FanDuel, DraftKings, and Fanatics have begun asking questions about how Illinois will be taxing their new surcharge for bettors. All three have added these small fees in response to the state’s new “per-bet” tax to offset costs. However, the state has yet to confirm if these new surcharges will be taxed.

While operators confirmed they are still waiting for confirmation, they believe the surcharges will be tax-exempt. 

Taxing Surcharges Would Escalate Tensions

DraftKings CEO Jason Robins and Flutter CFO Tob Coldrake have both publicly stated that they don’t believe Illinois will tax the surcharge fees. They referred to it as a “pass-through” charge that is tax-exempt. 

While Illinois has not made a final decision on the topic, there is reason to believe it will decide to tax the new fees. According to a report from SBC Americas, the Illinois Gaming Board (IGB) did say operators would be required to account for the surcharge on their tax forms. 

If the state decides to tax surcharge fees, it could be the final straw for some operators. Operators were fed up when Illinois raised its annual tax rate in 2024 and added a per-bet tax just one year later. If a new, unexpected tax is added, it could lead them to exit the market over the rising cost of doing business.

Industry Awaits Latest Illinois Sports Betting Numbers

The entire sports betting industry is keeping a close eye on the battle taking place in Illinois’ sports betting market. While few states have seen their relationships with sportsbooks sour as much as in Illinois, battles over tax rates have been ratcheting up tensions. 

Many states have been able to successfully raise their tax rates on sportsbooks over the last year, though most have been small hikes. Larger proposals have continued to fail under threats from operators, except in Illinois. The state has chosen to plow through resistance from the industry, but has continued to succeed so far. If the market remains strong during this sports betting skirmish, it would lead other states to follow the lead of Illinois lawmakers.

Chicago Considers Its Own Tax

To the surprise of many, the city of Chicago has been considering an idea to add its own “pet-bet” tax on wagers placed within the city limits. Proponents believe the city deserves the revenue, given that most bets are placed there. While Chicago does receive money back from the state’s sports betting tax revenue, some believe it's not enough.

While no official steps to add the tax have been taken, sportsbooks have not been shy about warning against it. Operators already believed they are being unjustly targeted to make up for financial shortcomings caused by state lawmakers. If Chicago adds yet another tax, it will lead to a Chicago-only surcharge being added by sportsbooks that choose to remain.