On Dec. 23, Chicago Mayor Brandon Johnson agreed not to veto a budget passed by the City Council that included an unprecedented new tax on sports betting companies.
In the $16.6 billion budget, a first-of-its-kind municipal sports betting tax of 10.25% on the money online sports betting apps generate within city limits. It will go into effect Jan. 1, 2026.
Chicago projects to generate about $26 million annually from the new sports betting tax.
Geolocation technology makes the collection of such a tax possible.
The 10 online sportsbooks in Illinois must also pay taxes at the state and county levels.
The Chicago sports betting tax comes as public opinion of legal sports betting has soured.
Since 2020, Illinois-sanctioned sportsbooks have won more than $4.7 billion from players in the state, according to state figures.
Sports Betting Lobby Responds
The Sports Betting Alliance, a lobbying group that represents companies such as FanDuel and DraftKings, said the tax creates an undefined regulatory framework in Chicago separate from the state’s mobile sports betting licensing framework.
The SBA claimed that online sportsbooks do not know how to comply with the new municipal tax and could be forced to shut down their operations in Chicago. In other words, they would block access to their apps within city limits.
“In the absence of defined terms, application standards, required documentation, and administrative procedures, operators would have no meaningful way to comply with the ordinance upon its effective date,” the SBA said in a letter to Johnson ahead of his decision on the budget.
“It is urgent that your Office takes action to develop a cogent licensing framework and to delay the effective date by at least 180 days to allow operators to understand the requirements, prepare and submit complete applications, and obtain the necessary City licenses prior to enforcement.”
The SBA added that there could be a “shut-down of online sports wagering in Chicago.”
It appears the betting industry’s pleas fell on deaf ears in the Windy City.
License vs. New Tax
Following publication of this article, Jeremy Kudon, president of the SBA, said in a comment on GamblingHarm.org’s LinkedIn page:
“Important point of clarification that’s been lost in reports on the letter: Neither the SBA nor its member companies are threatening to go dark on January 1 in response to the tax itself. Don’t get me wrong, it’s terrible policy and will give even more oxygen to illegal and unregulated markets. But the threat to go dark goes to the difficulty of obtaining a new license from the City of Chicago in the final 8 days of the year when people are out on vacation.
“Regulated operators don’t have the luxury of operating in a jurisdiction without a license; this tax could force them to decide between operating in the nation’s second highest GGR city during one of the busiest periods on the sports calendar or risking their license in every other state where they operate. In other words, this isn’t a boy who cried wolf situation. It’s an ill conceived tax that could backfire massively for the City and State.”
What’s Next for Chicago Sports Betting Tax
According to reports, Illinois lawmakers are weighing their options on how to respond, if at all.
It’s unclear if sports betting apps will actually cease offering bets in Chicago at the New Year. January is a lucrative month for the industry thanks to the NFL playoffs and upcoming Super Bowl.
The successful passage of Chicago’s new sports betting tax comes as so-called “prediction markets” proliferate in the U.S. These federally certified sports betting platforms operate outside the bounds of state gambling law.
Under a stock-market-style form of sports gambling, these controversial platforms have so far been able to circumvent state regulation. In recent days, FanDuel, DraftKings, and Fanatics each launched their own prediction market apps.
None of them launched prediction market sports betting in Illinois.
It’s unclear whether they would make their prediction sports markets, which are not subject to state or local taxes, accessible in Chicago. Such a move could start a new legal fight.
Other prediction markets, such as Kalshi, facilitate sports betting in Illinois, which the state says is illegal gambling.
GamblingHarm.org will continue to update this article.
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