Chicago's New Sports Betting Tax & Licensing Law Unveiled

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Chicago's New Sports Betting Legislation and Taxation Impacts

In recent developments in Chicago, major sportsbooks including FanDuel, DraftKings, Bet MGM, Bet365, and Fanatics faced a significant challenge with the city's new budget, which took effect on January 1st. Despite threats from these sportsbooks, represented by the Sports Betting Alliance, to leave the city if the new budget was implemented, they have remained due to the budget's new licensing requirements. Previously, these sportsbooks were only required to be licensed by the state of Illinois, but the new mandate necessitates additional licensing directly from Chicago, with no clear guidelines on the issuance of these licenses provided in the budget.

Furthermore, the budget introduced a new 10.25% tax rate on sportsbooks, which they contested through an ongoing lawsuit. These sportsbooks are already subject to a tax rate between 20% to 40% at the state level, plus a 50 cents per bet fee implemented last year. The introduction of Chicago’s city-specific tax, a first of its kind, significantly increases the financial burden on these platforms. In response, sportsbooks have historically passed such costs onto customers, evident from the 50 cents fee addition to each bet following last year's new Illinois tax.

Amidst the backdrop of these financial and regulatory changes, Illinois lawmakers have proposed a bill aimed at preventing Chicago from imposing additional taxes over the state's sports betting tax. This legislation also includes a provision that would limit Chicago's revenue from the state's sports betting tax if the city tax persists. This unfolding situation highlights a broader trend of local governments seeking new revenue sources through industry-specific taxes, which might influence similar actions in other states and cities.

The outcome of this legal and legislative confrontation could set a significant precedent for how sports betting operations are taxed and regulated across different jurisdictions in the U.S. As this situation continues to develop, industry observers and stakeholders alike are closely monitoring the implications for the future fiscal landscape of sports betting in Chicago and beyond.