Chicago sports betting tax takes effect as Illinois operators sue
Summary
Chicago has activated a 10.25% local tax on sports betting from 1 January 2026, layering it on top of Illinois’ substantial state levies (a 20%–40% graduated tax on adjusted gross revenue plus a per‑wager fee). The Sports Betting Alliance — representing major operators including Bet365, BetMGM, DraftKings, Fanatics and FanDuel — has filed suit in Cook County, arguing the city exceeded its constitutional authority to impose the levy. The alliance initially sought an injunction but withdrew that request after the city issued last‑minute licences. Meanwhile, state legislators have introduced bills to block or blunt local sports betting taxes as lawmakers prepare to reconvene in Springfield on 14 January.
Key Points
- Chicago’s 10.25% local sports betting tax came into effect on 1 January 2026.
- The new city tax is added to Illinois’ existing burdens: a 20%–40% graduated state tax on adjusted gross revenue and a per‑wager fee introduced last year.
- The Sports Betting Alliance (Bet365, BetMGM, DraftKings, Fanatics, FanDuel) filed a Cook County complaint saying Chicago lacks constitutional authority to impose the tax.
- The SBA withdrew its injunction request after receiving last‑minute city licences allowing operation inside Chicago.
- State lawmakers (eg HB 4171 by Rep. Dan Didech) have proposed legislation to stop municipalities creating their own sports betting taxes; another bill from Senator Patrick Joyce would reduce state income tax distributions to cities that levy such taxes.
- Operators have warned the combined tax burden could push them to scale back or exit markets, with potential consumer and fiscal consequences including a shift to illegal markets and lower state revenues.
Content Summary
Mayor Brandon Johnson neither signed nor vetoed the amended city budget that included the sports betting tax, allowing it to take effect. The Sports Betting Alliance claims Chicago’s move exceeds the powers granted to a home‑rule unit under the Illinois Constitution. After the suit was filed seeking an injunction to block enforcement, the alliance pulled that request when the city issued licences enabling the operators to continue taking bets in Chicago. In response to the local tax, state legislators have filed bills aimed at preventing municipalities from imposing their own sports betting levies or reducing state distributions to penalise such local action.
Illinois has already increased the tax burden on sportsbooks over recent sessions — shifting from a flat 15% to a graduated 20%–40% rate in 2024 and adding a per‑wager fee last year — and operators have implemented measures to mitigate some of these costs. Lawmakers and industry voices warn that further tax increases risk eroding the market and producing lower-than-expected revenues for governments.
Context and Relevance
This story sits at the intersection of municipal finance, state regulatory policy and the commercial viability of the US sports betting market. Chicago’s action represents a test case: if cities can layer local levies on top of state taxes, operators face materially higher costs that could alter pricing, product availability and market presence. For anyone tracking US sports betting regulation, operator economics, or municipal revenue strategies, the dispute highlights a potential flashpoint that could prompt legislative fixes in Springfield and influence operator strategy nationwide.
Author style
Punchy: this is a live policy battle with real commercial stakes — read the detail if you follow US sports betting policy or operator economics. The legal and legislative moves set now will shape how quickly local governments try similar taxes elsewhere and how operators respond.
Why should I read this?
In short: if you care about where betting firms will operate, how tax bills affect odds/promotions, or whether cities can raise new revenue from gambling — this matters. We’ve sifted the legal challenge, licence twist and the bills hitting Springfield so you don’t have to dig through court filings and session calendars.