Illinois' new sports betting tax could hurt casual gamblers most
The big picture: Illinois' new state budget includes a tax hike for online sports gaming — $0.25 for the first 20 million wagers, then $0.50 for every bet after that — which will impact big sites like FanDuel and DraftKings, and their customers.
Why it matters: FanDuel announced it will pass that tax onto consumers, instituting a $0.50 tax on every online wager come Sept. 1, just in time for football season, which generates the most sports betting revenue.
DraftKings has signaled similar plans, but hasn't announced any hikes yet.
Those are the only two online gaming sites to pass the 20 million wager mark in the state last year and generate close to 75% of the state's sports betting market.
Zoom in: Both sites have put down roots in Chicago, opening brick-and-mortar sports books at Wrigley Field and the United Center. Company leaders were initially outraged by the state's new tax and even suggested they could end their operations in Illinois.
They've since backed away from that stance, instead opting to pass the tax directly to customers.
The intrigue: While online gaming is a multibillion-dollar industry, a large portion of the gamblers are casual users, placing smaller bets or running fantasy sports competitions.
What they're saying: "We are disappointed that the Illinois Transaction Fee will disproportionately impact lower wagering recreational customers," Flutter CEO Peter Jackson said in a statement. Flutter is the parent company of FanDuel.
"We also believe the introduction of the Illinois Transaction Fee will likely motivate some Illinois-based customers to bet with unregulated operators. These operators do not contribute tax revenue to the state."
Flashback: Online gambling has exploded since states started legalizing it in 2018.
By the numbers: Since Illinois legalized it in 2020, over 1.3 billion individual bets have been placed, wagering over $48 billion, according to the Illinois Gaming Board.
FanDuel made $491 million last year, while DraftKings made $418 million. Together, both companies paid over $200 million in taxes.
Yes, but: The state, which is facing budget deficits, wants more.
Context: This isn't the first time Illinois has dipped into sports gambling revenue. Just last year, they passed a graduated tax system that taxed sites up to 40% based on revenue. This new tax adds on top of that.
Between the lines: If sports gamblers leave these sites and use the black market, it would undermine the state's revenue goals.
"Should the state reverse its decision at any point in the future, FanDuel will immediately remove the $0.50 transaction fee," Jackson said.
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