A letter sent from the Illinois Gaming Board to sports betting stakeholders in June outlines how the agency will implement the state’s new per-wager tax — and reveals that operators will have to pay the surcharge on all bets, including those made with bonus bets, credits, or any kind of promotion.
This means that if an operator is giving away a “free” bet, it will still have to the pay the state the per-wager fee, per the June 17 letter obtained by InGame.
In May, the Illinois legislature passed a first-of-its kind per-wager tax that will be imposed on all digital sports betting operators, and will ultimately be more costly to the biggest operators. The new tax is $0.25 on the first 20 million wagers placed with an individual operator, and $0.50 on every wager after those 20 million. The tax went into effect July 1. The first payments, according to the IGB letter, are due Aug. 31, when operators report their July revenue.
Industry response to the new tax has been roundly negative, and according to InGame estimates, could cost operators up to $125 million per year. When a progressive tax implemented in 2024 is factored in, operators went from being charged 15% on adjusted gross revenue to about 51% by the state.
DraftKings and FanDuel announced that they will pass a $0.50 per-bet surcharge onto customers, and Fanatics Sportsbook will pass on a $0.25 surcharge. DraftKings and FanDuel will certainly surpass the 20-million wager mark while Fanatics may or may not, and all other operators are unlikely to. BetMGM, Hard Rock, and Rush Street Interactive have all imposed minimum bets, ranging from $1.00-$2.50, in Illinois in response.
Per the IGB letter, operators must fill in a new box on their reporting forms in which they will be asked to calculate the per-wager tax based on the number of wagers taken each month. The IGB also clarified the surcharge is to be imposed when the bet is taken, regardless of when the event takes place or what the result is. It goes on specify that bets that end in a “push” — essentially a tie, in which neither the house nor the consumer wins and the stake is returned to the customer — will still be taxed.
The tax will also be applied to early cashouts, while parlays, round-robin bets, or other “composite” bets will be subject to a one-time per-wager tax.
‘Fair Play,’ ‘Early Exit’ refunds may be taxed
The IGB wrote that it is aware that some sportsbooks have labeled bets that pushed as “voids,” but going forward “this definitional distinction now has a concrete impact on tax revenue reporting due enactment of the per-wager tax. Accordingly, the IGB strongly encourages all licensees to review your house rules, internal controls, and record keeping systems to ensure that pushed wagers are not treated as voids in your sports wagering systems and that your reporting of wagers and tax liabilities is accurate and statutorily compliant.”
The only bets that will not be taxed are some cancelled wagers. In the letter, the IGB wrote that a “wager that is void under any provision of the IGB Sports Wagering Rules, or cancelled pursuant to any provision of IGB Sports Wagering Rule 1170, is treated as if it never occurred and does not incur the per wager tax.”
Given the IGB’s definition of a cancelled wager, it seems possible that Fanatics and DraftKings could be on the hook for a per-wager tax for consumer-friendly programs they run. Fanatics has long offered its “Fair Play” program, under which if a player exits a game in a predetermined amount of time, prop bets involving that player are refunded. DraftKings Aug. 4 announced its new “Early Exit” program, which is similar to “Fair Play.”
Previously, Fanatics was able to refund the wager with no penalty, but it’s possible that with the introduction of the per-wager tax, such bets may not fit the IGB definition of cancelled, meaning that Fanatics and DraftKings would still pay the tax, even though the companies are offering consumers a refund. A key difference between the programs is that Fanatics refunds the cash bet to consumers while DraftKings will offer a credit.
