Executive Briefing
Illinois became the first US state to levy a per-bet excise tax on sportsbooks, and six months in, the state is collecting more money from noticeably fewer bets, a combination that should worry every operator watching which state copies the model next.
The Update
Illinois moved its online sports betting tax from a flat 15% to a tiered structure of 20% to 40% of adjusted gross revenue in 2024, then went further in the fiscal year 2026 budget passed on 31 May 2025, adding a per-bet excise tax of $0.25 on each of a sportsbook’s first 20 million wagers annually and $0.50 on every wager after that, effective 1 July 2025. No other US state levies a per-bet fee on sportsbooks. The state had projected roughly $40 million a year from the excise tax alone; it collected more than $21 million in the first quarter of fiscal year 2026 and around $60 million from the combined tax measures over the first six months, ahead of forecast. FanDuel and DraftKings, which together handle roughly two thirds of Illinois volume, crossed the 20 million wager threshold within months and began passing the charge directly to customers through per-bet surcharges from 1 September 2025, with Fanatics, bet365 and Caesars following and five smaller operators raising minimum bet sizes instead.
Wagers placed in the state fell 15% year on year in September, worsening to a 25% year on year drop in December, even as total handle rose because bettors staked more per wager. State representative Daniel Didech has since filed a bill to repeal the per-bet tax, and Illinois lawmakers are separately moving to tax prediction market exchanges such as Kalshi at 15% of gross revenue, a proposal Kalshi is contesting in federal court on the grounds that it already answers to the Commodity Futures Trading Commission.
The Strategic Consequence
This is overwhelmingly an online and mobile story. The excise tax technically applies to retail sportsbooks at Illinois casinos too, but mobile wagering dominates volume so heavily that the fiscal effect, and the behavioural effect on bettors, is concentrated in the online channel; land based sportsbook operators are exposed mainly through shared licence costs rather than through the surcharge mechanics reshaping the mobile product. For public operators, the strategic question is not really about Illinois’ revenue, which is a rounding error against national handle, it is about precedent. Illinois’ own data undercuts the state’s rationale: Illinois representative Jehan Gordon-Booth has said openly that ‘what you think you’re going to get from raising taxes, you’re not going to get’, and one independent analysis put the net monthly revenue gain from the layered tax increases at under $750,000 against a backdrop of double digit volume decline. That gap between intended and actual fiscal effect is exactly the evidence boards should expect other states to either heed or ignore for reasons that have nothing to do with gambling policy.
Louisiana, Maryland and New Jersey already raised sports betting tax rates in 2025, and states with currently lower rates, Kansas, Iowa and Indiana among them, are named by industry consultants as likely candidates for 2026 proposals, particularly as federal budget cuts push state legislatures to look for new revenue. Louisiana’s Gaming Control Board chairman has separately warned that rates approaching 50% would push operators toward exit rather than continued investment. Boards should treat Illinois less as an isolated cost increase and more as a live experiment other legislatures are actively watching, with the added complication that the fight over how prediction markets get taxed and regulated, state gambling law versus federal commodities oversight, is now playing out in the same state at the same time.
Boardroom Questions
1. If two or three more states adopt a per-bet excise structure in 2026, what does that do to our national blended tax rate and product economics, and have we modelled it rather than treated Illinois as a one off.
2. Are our customer facing surcharges and minimum bet changes in Illinois protecting margin at an acceptable cost to retention and lifetime value, and do we have the data to know the answer rather than assume it.
3. How exposed are we to the prediction markets question, either as a competitive threat if state tax treatment forces traditional sportsbooks to compete with lighter regulated exchanges, or as a direct participant, and what is our position if Kalshi’s federal preemption argument succeeds.
Sources
1. Nelson Mullins, ‘Tax Reports: Illinois First State in the Nation to Implement a Per-Bet Excise Tax on Sports Gambling’, 2026, https://www.nelsonmullins.com/insights/blogs/tax-reports/all/tax-reports-illinois-first-state-in-the-nation-to-implement-a-per-bet-excise-tax-on-sports-gambling
2. SBC Americas, ‘Illinois Per-Wager Tax Raises $10M in September As Bets Fall’, 17 November 2025, https://sbcamericas.com/2025/11/17/illinois-sports-betting-tax-september/
3. Gambling Insider, ‘Illinois Bill Seeks to Repeal Per-Bet Sports Betting Tax as Wager Counts Fall for Four Straight Months’, 2026, https://www.gamblinginsider.com/news/110781/illinois-repeal-per-bet-tax-wagers-decline-hb5143
4. iGB, ‘Sports betting taxes: Why potential 2026 hikes by US states could backfire on budgets’, 2026, https://igamingbusiness.com/sports-betting/nclgs-lawmakers-sports-betting-taxes-discussion/
5. rg.org, ‘Illinois Considers Steeper Sports Betting Taxes and New Rules for Prediction Markets’, 2026, https://rg.org/news/gambling-industry/illinois-sports-betting-tax-increase-prediction-markets-2026