Illinois Gov. JB Pritzker signed the FY 2026 state budget on Monday, making official a first-of-its-kind per-wager tax on online sports betting in the U.S. that will go into effect on July 1.
Sportsbooks will now be taxed 25 cents for each of the first 20 million bets taken in the fiscal year and 50 cents for those beyond the first 20 million. This primarily affects DraftKings and FanDuel, as they are the only sportsbooks expected to reach the 20 million bet threshold.
Illinois is the second-largest legal sports betting market in the U.S., behind New York, and the new tax will have a significant impact on those two leading sportsbooks. Both are projected to pass the 20 million mark in September, leaving them with the 50-cent-per-bet tax rate for at least nine months of the fiscal year.
According to an InGame analysis calculated immediately after the new tax was revealed: “Using the 9.3% year-over-year growth in the volume of wagers and 9.1% growth in adjusted gross revenue as a projection for the final three months of the fiscal year, FanDuel would be on pace to pay an additional $72.5 million in combined taxes for the final quarter of FY 2025, if the new tax were already in place.”
The new tax brings the projected total effective state gaming taxes for FanDuel and DraftKings in Illinois to over 51%, surpassing New York’s rate.
Familiar approach in Illinois
This isn’t the first time Illinois imposed an additional tax burden on the biggest operators. Last year, the state raised the tax from a flat 15% to a progressive scale of 20-40%, which also impacted FanDuel and DraftKings most.
In response to the proposal of the per-wager tax, DraftKings and FanDuel announced last week that they will pass the cost along to their customers, charging players an additional 50-cent transaction surcharge for every bet made after Sept. 1.
The tax has the potential to push customers toward the black market and offshore sportsbooks rather than them paying the surcharge.
“It could drive more of the VIP business out of the market into black markets, and it could reduce the potential growth of [sports betting in] the state largely because the sportsbooks now cannot reinvest as much in both promotional and marketing. That would lower engagement by definition versus a comparable state that doesn’t have these restrictions,” Joe Stauff, a senior equity analyst at Susquehanna, told InGame.
The two major operators say they will remove the surcharge only if the state backs down from adding the new tax. The tax goes into effect July 1 and the surcharge not until Sept. 1, leaving time for Illinois to revise its tax plan — though Pritzker signing the new budget does not stand as an encouraging sign on that front.
“This is not the end of this conversation,” wrote the Sports Betting Alliance, a trade group made up of five operators including both DraftKings and FanDuel, shortly after the new tax was unveiled. “We will continue to fight this discriminatory tax alongside our customers — both right now in Illinois and in any state that considers these harmful tax changes in the future.”
