State lawmakers move to block towns from imposing taxes on sports betting

Chicago’s steep new tax on sports betting is creating a backlash in Springfield that could lead to new restrictions on whether municipalities should have the power to tax gambling revenue.

The highly contested tax charges sports betting businesses 10.25% on their net gambling revenue. The tax, which took effect Jan. 1, is in addition to the state’s existing levy on sports gambling, which includes per-bet fees. The combination gives Illinois one of the most severe betting tax structures in the country.

As Illinois begins Problem Gambling Awareness Month, state representatives from both sides of the aisle say the tax will drive bettors to illegal markets, hurting revenues for Illinois. And some Chicago officials worry it could become a point of tension between the city and state legislators, hindering future collaboration on financial issues.

“When we passed our sports betting law, it was never the intent of the legislature that there would be a patchwork of different rules and different tax rates in every municipality throughout the state,” said state Rep. Daniel Didech, a Democrat from Buffalo Grove. “Now that Chicago has opened that door, I think we’re going to try to close it.”

Didech, who serves as chair of the Illinois House Gaming Committee and played poker professionally for more than five years, filed House Bill 4171 in October with a long list of Democratic and Republican cosponsors. It passed committee in February, taking it one step closer to a vote.

The bill would immediately negate Chicago’s tax if passed and signed into law. Didech said it is intended to maintain uniform, statewide regulations on sports gambling by preventing local governments from imposing their own taxes.

The state raked in $429 million in tax revenues related to sports gambling in fiscal year 2025, according to the Commission on Government Forecasting and Accountability.

Illinois’ tax structure

Illinois ranks fifth in the U.S. and first in the Midwest in taxes collected on sports wagering, according to the Illinois Policy Institute.

When sports betting became legal in the state, sportsbooks paid only a flat 15% tax on revenues. Now the rate is as high as 40% depending on a sportsbook’s revenue, while the state also enacted a 25- to 50-cent per-wager fee last year.

The most recent data from the Illinois Gaming Board shows that the total number of bets placed fell by 15% from September to October last year after the per-wager tax was introduced.

Chicago identified the sports betting tax as a stream of “progressive revenue” in its 2026 Budget Overview, claiming it would help balance the budget without cutting essential services or raising costs for working families. The tax was passed on June 1, 2025, and city officials projected the measure would generate $26.2 million.

But the new city tax amplified growing tensions between Chicago and the Sports Betting Alliance, which represents major sportsbooks including DraftKings, FanDuel and BetMGM.

The Alliance filed a lawsuit in December challenging the tax. The coalition argues that the Sports Wagering Act does not allow the city to impose its own sports betting taxes on top of the state’s.

The city declined to comment, citing pending litigation.

A hearing is scheduled later this month. “Ultimately, we just have to continue to press the case,” Alliance president Joe Maloney said.

Chicago and Springfield at odds

In the meantime, state lawmakers are taking aim at Chicago’s tax — and trying to prevent other municipalities from setting their own.

Sen. Patrick Joyce, a Democrat from Essex, filed Senate Bill 2760 in January, which seeks to penalize Chicago by taking the total amount the city gained from its sports wagering fee and deducting it from Chicago’s share of the Local Government Distributive Fund, one of the largest sources of state funding for cities and counties. That amount would then be redistributed to other municipalities.

Joyce said he, along with other members of the General Assembly, is open to sitting down with Chicago officials to discuss the bill.

He also filed Senate Bill 2800, a bill identical to Didech’s House version that denies home rule units the authority to regulate or tax sports wagering.

The tax remains a divisive topic in Chicago, too.

Alderman Gilbert Villegas, who opposed the new tax, said he is concerned it would cause a rift between the city and state lawmakers.

“I just think it was the wrong approach,” he said. “To do this with Springfield signaling that there was going to be huge opposition and a potential bill sends the wrong message from a city that is going to need to be down in Springfield making requests for different items.”

What does the tax mean for bettors?

Sportsbook operators have already been feeling the squeeze after the implementation of the state’s per-wager tax in September, which required them to pay 25 cents on each of the first 20 million bets placed, and 50 cents for each bet over that amount.

Some betting operators, like FanDuel, have shifted the cost to customers by forcing them to pay 50 cents per bet. Others have responded by raising the minimum bet. The number of total bets placed in Illinois fell to 28.5 million in the fall from 33.6 million the year before.

Both the Sports Betting Alliance and state lawmakers worry that the city’s tax would drive Chicago bettors away from licensed sportsbooks and into illegal, unregulated markets.

But some avid sportsbook users, like Chicago-based social media content creator Sam Cantalupo, continue to stomach the cost.

Cantalupo is known for his sports betting analysis videos, which have garnered over 100,000 likes on his TikTok channel “djsammycaps.” While he has signed petitions opposing the city’s sports betting tax, he said that, at the end of the day, he is still willing to pay a higher price if an even heftier tax were imposed.

“If they raised it, honestly, I would probably have to suck it up and pay it,” he said.