Illinois Governor J.B. Pritzker has pushed through a hefty tax hike on the booming sports betting industry, backing online sportsbook giants FanDuel and DraftKings into a corner with a graduated tax system that skyrockets from a flat 15% to as much as 40%, as reported by the Chicago Sun-Times. The move is expected to rake in more cash for the state's coffers, but not without protest from the industry's top players, who claim the increase could force them to reevaluate their business in the Prairie State, although experts question the credibility of their threats to pack up and leave.
In an aggressive countermovement, the sportsbook giants have rallied their customer base, informing users of the potential for this tax hike to lead to worse odds and fewer bets, CBS Chicago reported, even though the governor's office maintains that corporations should pay their "fair share.” The operators, united under the Sports Betting Alliance, are fearful that a steeper tax could enhance the illegal betting market with competitive disadvantages imposed on legal operators, and potentially leave only the strongest sportsbooks standing in Illinois.
According to the Sun-Times, this new tax structure promises to land a more significant blow to FanDuel and DraftKings, the only sportsbooks that reported earnings over $100 million last year in Illinois. If the new tax system had been in place last year, FanDuel would have paid roughly $145 million in taxes, with DraftKings facing a $109 million tax bill -- a striking increase from their $62 million and $48 million payments, respectively, last year.
While some critics and bettors worry, with one sport betting regulatory reporter telling CBS Chicago that, "This is going to affect the way that you bet," researchers like Victor Matheson indicate that there's "no evidence" to suggest these companies can't shoulder the tax burden with reports showing the absence of correlation between high state tax rates and the volume of gambling; hence, placing pressure on these sport betting bigwigs to contribute their due to the state—and by extension, to society—appears justified especially when considering their substantial profits.
The heated debate lands amidst a constricted financial time for Illinois with Echoing sentiments from Pritzker's press secretary, Alex Gough, who stated to press, "since the legalization of sports betting in Illinois, gaming companies have enjoyed one of the lowest sports wagering taxes in the nation,” this measure seeks to balance the fiscal demands of the state with the explosive growth seen in the sports betting industry, per his comments to CBS Chicago.
