Officials Reveal Stance On Chicago Sports Betting Tax

Mayor Brandon Johnson has proposed a special Chicago sports betting tax in his latest budget. Officials throughout the state of Illinois are not thrilled about it.

In fact, a group of The Prairie State representatives sent a request to a whopping 50 Chicago Alderpersons imploring them not to support the requested tax change. If this comes as a surprise to anyone, it really shouldn’t. After implementing a different tax system for sports betting throughout the state of Illinois, state officials are no doubt reluctant to throw another curveball into the equation.

For the time being, it is not clear whether Mayor Johnson or how many Chicago reps are prepared to acquiesce. Many officials in The Windy City maintain that a Chicago sports betting tax is necessary to propping up a budget. State representatives, meanwhile, counter that the Illinois sports betting tax changes take care of any discrepancy that may otherwise exist. As Legal Sports Report’s Matthew Waters writes:

“The letter from 29 representatives urged against approving the proposed 10.25 percent tax imposed on online sports betting done within the city of Chicago. Signing the letter were Rep. Daniel Didech, chair of the House Gaming Committee, and Rep. Curtis Tarver II, chair of the House Revenue Committee. This is the latest step taken by Didech and Tarver to kill the proposal from Mayor Brandon Johnson. They were two of the five state representatives to cosponsor HB 4171, which would make it clear that only Illinois’ state legislature can tax sports betting.”

From the outside looking in, it can be tough to discern why Illinois wants absolute control over sports betting tax rates in the state. But when you dig into the details, their stance starts to make sense. Whether it will be successful is a separate matter.

Here’s Why Illinois State Officials Don’t Support a Chicago Sports Betting Tax

The letter in opposition of a Chicago sports betting tax thoroughly outlines why it shouldn’t be allowed. Here are the most critical points, once again via Waters:

“The letter calls the policy ‘deeply problematic’ for two main reasons. First, the legislature has already raised Illinois sports betting taxes twice in two years between the change to a tiered rate capped at 40 percent in 2024 and the per-bet tax added July 1. Perhaps more importantly, such a policy could lead to Illinois’ more than 200 other home-rule municipalities to impose something similar.

“‘If each (or even many) were to impose its own tax on a state-regulated industry, we would end up with a fragmented and unstable framework that undermines the consistency and predictability required for effective state regulation,’ the letter reads. ‘The ripple effect could extend far beyond gaming. These types of policies could open the door for a patchwork of local taxes in other state-controlled policy areas, making enforcement and compliance nearly impossible.’”

No one should bemoan how much money online sportsbooks in the United States are taxed. But the point about potential ripple effects made here is salient. If a Chicago sports betting tax is allowed, it stands to reason other “home-rule” regions will push for the same. Apart from that creating a decentralized system, it dares Illinois online sportsbooks to take matters into their own hands.

This isn’t a faux-threat. It’s already happening.

Sportsbooks in Illinois will Retaliate if the Chicago Tax Rate is Implemented

Sports betting sites in Illinois have already fired back to the state’s initial tax hikes. Earlier this year, they all started charging per-bet processing fees or instituting hire minimum-wager limits. They are bound to ratchet up those consumer costs once again if forced to pay out more money in taxes within certain parts of the state.

On a more dramatic scale, some Chicago sportsbooks could decide to pivot entirely out of the market. We are not just talking about the city itself, either. They could call an audible in Illinois at large.

Sure, upon first consideration, it feels like online operators would not willingly pull out of a mid-tier market. Think a little longer, and you start to wonder whether they can stay inside Chicago and Illinois without subjecting themselves to the additional tax rates.

The Rise of Prediction Markets Looms Large Here

Enter the growing popularity of prediction markets in the United States.

These transactions are considered trades, and they are often called “event-based contracts.” Customers are effectively investing in an outcome. In the realm of sports, it can be something as simple as: Will the Chicago Bears beat the Minnesota Vikings? The payouts for these “trades” are determined by how the public is investing. If most are buying contracts that stipulate the Bears will win, the prospective return will be lower. So on and so forth.

Now, because these transactions are not considered sports betting, they currently aren’t subject to state oversight. Instead, they are federally regulated, which means they can operate in markets that don’t even have legal sports betting.

What’s to stop Chicago sports betting operators from simply establishing their own prediction-market business, and cease typical sports gambling offerings? There is sure to be some red tape. However, we have already seen heavyweights like FanDuel and DraftKings lean into their own prediction markets. While they are so far staying out of markets in which they have a sports betting imprint, this could theoretically change. And from their point of view. Being hit with yet another Chicago sports betting tax hike could compel them to do just that.

Suffice it to say, a lot could be riding on the Chicago sports betting budget bill.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: