Illinois Sports Betting At Age 5: Is Past Prologue?

There have been more than 1.3 billion online wagers placed online since mobile sports betting launched in Illinois five years ago Wednesday. Over $48 billion of the $50 billion-plus handle (including yet to be announced May figures) generated in that span has come from the now-10 mobile sportsbooks competing for bettors’ dollars.

The Land of Lincoln is the second-largest market in the United States with the third-largest handle total in the post-PASPA era, having likely overtaken Nevada for good in April. Chicago, That Toddlin’ Town, is the epicenter for most of that mobile wagering — the bulk of operator revenue originates there in Cook County — as well as the tax receipts that the county and the state receive.

It has been five years of mostly growth, but new questions have arisen in a marketplace that has been both innovative and punishing for licensees. How the state and licensees arrive at answers to some of the newer challenges will likely determine whether Illinois can remain among the top of the top in this industry.

Battle scars and bruised egos

To understand sports betting in Illinois, one has to go back in time, pre-dating the sausage-making of the actual gaming expansion bill that legalized it in June 2019. Sports betting here starts with one of its variants: Daily Fantasy Sports.

Long a gray area in terms of legality, the contests were addressed by then-Illinois Attorney General Lisa Madigan in an advisory opinion in late 2015. Madigan came to the conclusion the contests offered by DFS operators “clearly constitute gambling” under Illinois law at the time.

FanDuel and DraftKings took the matter to court, but more importantly, they continued to offer DFS contests, which allowed them to build a database of users. That, in turn, infuriated Rush Street Gaming and Rush Street Interactive co-founder Neil Bluhm, whose Rivers Casino has long been the crown jewel of the Illinois gaming scene.

Bluhm and the proverbial army of lobbyists on his behalf went to Springfield to make sure FanDuel and DraftKings would not be able to wield that database for mobile sports betting at launch. He originally sought a three-year “penalty box” in which FanDuel and DraftKings would not be allowed to enter the marketplace, and lawmakers set aside three online-only sports wagering licenses with a hefty $20 million price tag.

Both sides took to the airwaves in Chicago to make their case to bettors, with a barrage of radio and television ads saturating the third-largest market in the U.S. Eventually, the “penalty box” provision was reduced to 540 days, and in-person registration was required for access to mobile sportsbooks.

JB Pritzker, hero of Illinois mobile sports betting

If “penalty box” is the top term associated with Illinois and sports betting, then “Executive Order 2020-41” is likely second. First issued in June 2020 during the COVID-19 pandemic by Gov. JB Pritzker, it suspended the in-person registration provision for access to mobile betting.

That benefited DraftKings and FanDuel, who by that point had already found workarounds to the online-only license by partnering with land-based casinos — Casino Queen for DraftKings and Par-A-Dice for FanDuel. The 18-month window Bluhm and Rush Street thought its mobile sportsbook BetRivers would enjoy as first to market shrunk to less than seven weeks as first DraftKings launched and then FanDuel in the summer of 2020, followed by PointsBet and William Hill in the fall.

Pritzker’s repeated renewals of 2020-41 were industry and media catnip for the Friday afternoon news dump when the Governor’s office announced which executive orders stay in place. They were also instrumental in Illinois’ faster maturation compared to what it would have looked with solely in-person registration.

The casinos DraftKings and FanDuel tethered to were multi-hour drives from Chicago, and it was easier for city residents to make the short drive to Indiana, download the apps to wager in that state via remote registration, and then go back home. By the time Pritzker opted against a 10th overall renewal of 2020-41 in early April 2021, Barstool Sportsbook had just launched as Illinois’ sixth mobile option, and total mobile handle topped $3.4 billion.

JB Pritzker, villain to mobile sportsbooks

It is an oversimplification of sorts, but it can be argued Pritzker acted Thanos-like when it came to the momentous decision ahead of Fiscal Year 2025 to overhaul Illinois’ sports betting tax rates. The governor gained leverage with Executive Order 2020-41, and he sought budgetary balance when asking that the favor be returned.

Pritzker initially called for a tax rate hike from 15% to 35% when submitting his budget, seeking $200 million in additional revenue. But once more, Bluhm and his lobbyists did some heavy lifting in Springfield in the final weekend of legislative talks to tilt the floor against FanDuel and DraftKings.

The flat 15% levy — reasonable but high without promotional deductions — would be replaced by the first true progressive tax rates in the U.S. for sports betting. The floor would be 20% and the ceiling 40%, with 5% increases based on revenue thresholds. But the last threshold that triggered the 40% rate — $200 million in revenue in a fiscal year — could only be reached by FanDuel and DraftKings. It could be argued it was unknown if anyone besides them would even reach the $100 million mark that triggered the 35% levy.

With two months of revenue reports remaining in Fiscal Year 2025, Pritzker’s $200 million ask is all but certain to be answered in full. Those new tax tiers have already generated $173.9 million in additional mobile sports betting tax rates. FanDuel and DraftKings will have remitted receipts at the maximum 40% rate for more than half the fiscal calendar year, and Fanatics projects to be the only other operator reaching even 35%.

But as the table also shows, BetRivers’ share of the total state tax payments by licensees has plunged notably while FanDuel and DraftKings have seen their share increase. Additionally, Bluhm and Rush Street wrangled one last gilt-edged treat when it was determined retail sportsbook revenue would be taxed in a separate bucket as opposed to combined with mobile revenue.

That does not sound like a big factor until one realizes that Rivers Casino is responsible for roughly 35% of all retail action in the state. The $5.5 million that Rivers Casino’s retail sportsbook has generated in FY 2025 is not a notable sum, but it could have been enough to trigger a new tax bracket when combined with mobile winnings.

JB Pritzker, archenemy of FanDuel and DraftKings

Pritzker’s budget last year should have resulted in a clean slate between himself and the sports betting industry. Mobile sportsbooks knew a good portion of their growth came in part due to his Executive Order 2020-41, and they gritted their teeth swallowing the governor’s new tax rates.

But any chance of fostering goodwill likely went by the wayside with Pritzker’s Fiscal Year 2026 budget, which surprised the industry with a late per-wager tax addition to the budget that will take effect July 1. Like last year, the governor had a budget hole to fill, and again he turned to the sports betting industry. The 25-cent surcharge on the first 20 million wagers accepted by a mobile licensee and 50 cents on all wagers thereafter applies to all 10 sportsbooks. But as the above table shows, FanDuel and DraftKings get socked at an exponentially higher level versus the other eight licensees.

After DraftKings’ failed attempt to start a revolution last year with a proposed surcharge on winning wagers in high-tax states — which included Illinois — this time it wisely waited for FanDuel’s parent Flutter to fire the first salvo. On June 10, Flutter delivered with a 50-cent surcharge on wagers effective Sept. 1. DraftKings followed suit two days later with the same surcharge effective on the same day.

The date is key as September projects to when both FanDuel and DraftKings will cross the 20 million wager threshold to trigger the higher surcharge. Both may even make a small profit off the surcharge since they project to reach the 20 million wager mark during the month. The Sept. 1 deadline also provides a runway of sorts for representatives of the Sports Betting Alliance — to which they belong — to make the trek to Springfield if there is a fall veto session and convince lawmakers why this is bad for business.

A big market despite the lack of a sports savior

Despite the industry-unfriendly moves this year and last, upside remains. No operator that has entered Illinois has left, though three have rebranded.

Illinois still has its three online-only sports wagering licenses — and their $20 million price tags — available, but there are also five potential licenses available via tethers to casinos at a fraction of that cost. One, though, can argue less is more: Illinois’ 10 mobile sportsbooks may be the 10 best in the industry. That is a notable contrast to New York, where lightweight Resorts World is leaving the space at the end of the month and Bally Bet hardly moves the needle among the other eight in operation.

One interesting dynamic about Illinois is its status of being the No. 2 market in the U.S. despite a prolonged lack of success from its top-tier, Chicago-based professional sports teams. The Bears, Cubs, White Sox, Blachawks, and Bulls have played 24 playoff games combined since sports betting became legal in Illinois.

The Indiana Pacers, meanwhile, will play their 23rd game of this postseason Sunday in Game 7 of the NBA Finals at Oklahoma City. As revenue reports in Kansas and Pennsylvania attest, one title run from the hometown team can make a world of difference to sportsbooks and state tax coffers.

A potential headache in the making

The feeling is the per-wager tax battle is far from over. It remains to be seen if fellow Sports Betting Alliance members Fanatics, BetMGM, and bet365 — the last a newcomer to the SBA — would join FanDuel and DraftKings in levying a surcharge. They are the three operators most likely to reach the 20 million wager threshold for the higher 50-cent rate over the course of a fiscal year.

The rumors that Flutter has discussed a potential deal with upstart trading exchange Kalshi could also completely upend sports betting in Illinois — and the U.S. — as we know it. Consider a scenario where Flutter offers event contracts similar to single-event wagering on Kalshi: It would be first to market and conceivably provide freedom to make FanDuel a parlay-exclusive sportsbook.

Already more than two-thirds of FanDuel’s 54.6 million wagers in Illinois in 2025 have been parlays, and the $129.8 million in revenue from those bets has accounted for 70.5% of its overall total. FanDuel has a 5.1% hold on single-event wagers compared to a whopping 20.1% win rate on parlays, raising the question of whether it would be more cost-effective to use an exchange for single-event wagers.

The Illinois Gaming Board could counter that is not in the best interest of the state and potentially threaten to revoke the license, so there are plenty of moves on the sports betting chessboard to make. But after an unpredictable first five years on the scene, about the only good bet for Illinois sports betting is that it will remain unpredictable in the next five years.