Chicago Mayor Brandon Johnson and his city council are at odds with the 2026 budget, but one place they appear to have found common ground is on taxing city-based sports betting revenue.
In the “alternate” budget sponsored by 27 of the Chicago City’s 50 aldermen and submitted Wednesday, it included Johnson’s proposed 10.25% tax on all sports betting revenue generated within city limits. The city is looking to plug a $1.2 billion budget gap, with various taxes and levies being considered.
If approved as part of the budget, which would take effect Jan. 1 or when passed if the two sides fail to meet that deadline, operators would face a minimum 32.25% tax on Chicago-based revenue since they also pay a 2% tax on revenue generated within Cook County, where Chicago is located.
The only current tax on sports betting revenue in Chicago is a 2% levy with DraftKings for revenue generated at its retail sportsbook adjacent to Wrigley Field.
The proposal has met with protests across social media from the Sports Betting Alliance, which has been on the short end of tussles with legislators at the state level each of the last two years. Illinois overhauled its tax structure on sports betting in the 2024 budget, enacting progressive rates based on fiscal year revenue thresholds. In May, lawmakers enacted a per wager surcharge, the first of its kind in the country.
Win the battle, lose the war?
Johnson’s budget estimates the city could raise $26 million per year in revenue, which projects operator adjusted gross revenue (AGR) from city-based wagering at $253.6 million based on the 10.25% tax rate. That is 40% of the $633.6 million in revenue generated within Cook County in 2024.
Based on those figures, InGame estimated that DraftKings would face an effective tax rate of 54.9% on Chicago-based revenue when all levies are included or at their highest rate, while FanDuel would send 54.5% in remittance. Both operators could reach the maximum 40% tax rate at the state level as early as December by crossing $200 million in fiscal year adjusted gross revenue.
Illinois-based sportsbooks pay a progressive tax at the state level that took effect last year. It has a floor of 20% and a maximum tier of 40% based on fiscal year revenue thresholds.
Mobile operators are also paying a per-wager surcharge enacted with this year’s budget that took effect in July. The 25-cent and 50-cent surcharges on each bet have generated $20.6 million in state tax revenue the first three months in effect, with digital titans FanDuel and DraftKings already paying the higher 50-cent surcharge after surpassing 20 million in total wagers accepted.
In a big-picture context, Johnson and the city enacting a sports betting tax could jeopardize relationships with state politicians regarding home rule authority. Illinois State Rep. Daniel Didech, chairman of the Illinois House Gaming Committee, submitted a bill in October that would prevent Johnson from enacting home rule to levy taxes on sports betting by prohibiting local jurisdictions from taxing, regulating, or imposing fees on gambling.
Is a horse swap still possible?
Though both sides have the sports betting tax in place, the alternate budget submitted by the aldermen also includes plans to legalize video gaming terminals (VGTs) in the city. They are the biggest source of gaming tax revenue in Illinois, having generated $927.4 million in total receipts the first 10 months of 2025, but barred from Chicago via city ordinance.
An ordinance that would legalize VGTs passed out of the city’s License and Consumer Protection Committee in September but has yet to be heard on the city council floor. The ordinance as part of the alternate budget earmarked all VGT city-based tax revenue towards pension payments.
Some aldermen are skittish about legalizing VGTs in Chicago since it would likely legally permit Bally’s, which is constructing a $2 billion casino slated to open in September in the River West portion of the city, to re-open the Host Community Agreement the two sides have in place and potentially forego a $4 million annual payment.
