Illinois state Sen. Patrick Joyce has filed a bill that would reduce Chicago’s Local Government Distributive Fund allocation from the state by the exact amount the city would generate with its recently passed 10.25% sports betting tax on city-based revenue.
The 2026 Chicago budget is expected to take effect Thursday, with embattled first-term Mayor Brandon Johnson announcing last Tuesday he would neither sign nor veto the ordinance, thus letting it become law. Johnson originally proposed the city sports betting tax as part of his proposal, looking to raise an estimated $26.3 million in annual revenue, and the city council retained the levy as part of its “alternative budget.”
Joyce’s bill, SB 2760, which was first reported by Illinois Politico Dec. 18, is tidy in the sense it is revenue-neutral. Text of the bill is not yet available on the Illinois general assembly site. Illinois state Rep. Daniel Didech, who chairs the House Gaming Committee, filed legislation 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. The Illinois General Assembly opens Jan. 14, 2026.
That $16.6 billion budget, which did not have Johnson’s top wish of a corporate head tax, passed out of the Chicago City Council without a veto-proof majority. Johnson, though, did not follow through with his veto threat.
The ‘money’ phrase
Joyce’s bill proposes to amend a section of the State Revenue Sharing Act with a specific mention of sports betting to make the tax revenue neutral for the state, reading as follows:
“Not withstanding any other provision of law, if a municipality imposes fees, surcharges, or other costs for the privilege of conducting or participating in sports wagering, then the total amount of those fees, surcharges, or other costs shall be deducted from that municipality’s allocation under this subsection and redistributed to the other municipalities and counties in this State in accordance with the allocation formula set forth in this subsection (a).”
Along with Didech’s objections at the state political level, the industry has howled with outrage about potentially being socked with a third tax in Illinois in the last two-plus years. The Sports Betting Alliance (SBA), which has been the most strident and vocal critic of the proposed levy, warned of the logistical headaches it could create for the state’s 10 mobile operators since the budget does not have a licensing framework.
The SBA sent a letter to Johnson last week warning that operators may be forced to shut down in Chicago since the ordinance contains a requirement of being a license holder but does not provide a pathway to become one.
Taxes, taxes, and more taxes
Illinois sportsbooks saw the 15% tax on adjusted gross revenue that ushered in legalization in 2019 replaced by progressive rates ranging from 20% to 40% based on revenue thresholds with the state budget that took effect July 1, 2024. State legislators last July added a per-wager surcharge tax — the first of its kind in the United States — on mobile operators.
Those 10 licensees are paying either 25 cents per wager or 50 cents per wager, with operators paying the higher surcharge after crossing 20 million accepted bets over the course of the fiscal year. DraftKings and FanDuel are currently the only operators paying the higher surcharge, and both are paying 35% in state taxes after clearing $100 million in adjusted gross revenue (AGR).
The minimum tax on city-based revenue when the ordinance takes effect would be 32.25% as Cook County — home to Chicago — collects a 2% levy on county-based revenue. FanDuel and DraftKings project to pay 52.25% tax on city-based revenue for at least the final six months of the fiscal year as they will reach the $200 million AGR threshold that triggers the highest 40% state tax rate.
The effective tax, however, would be even higher due to the per-wager surcharge. It has contributed to the volume of wagering going down, but the state recorded a record $1.6 billion handle for October according to figures released by the Illinois Gaming Board on Dec. 19.
Illinois generated an additional $261.9 million in sports betting tax revenue during Fiscal Year 2024-25 with the switch to the progressive tax rates. The introduction of the per-wager surcharge that took effect July 1 with the FY 2025-26 budget has already generated $35.3 million in the first four months and contributed to receipts running $65 million ahead of last year’s robust total.
