Chicago considers 10.25% local sports betting tax on top of state levies

Illinois’ evolving tax framework for gambling may soon extend to the city level as Chicago weighs a 10.25% local levy on sports betting revenue, adding to the state’s progressive tax and per-wager surcharges that together have already reshaped how gaming revenues are collected.

The state of Illinois introduced a progressive sports betting tax structure in 2024 under Gov. JB Pritzker’s fiscal plan, replacing the former flat 15% rate. Online operators are now taxed between 20% and 40% of their adjusted gross revenue (AGR) depending on annual earnings, a change that generated $261.9 million more in tax revenue for fiscal year 2025 compared with the previous year.

A separate per-wager surcharge also took effect on July 1, requiring mobile sportsbooks to pay $0.25 for each of the first 20 million bets and $0.50 for wagers beyond that number. The levy raised more than $10 million in July and August alone, with additional increases expected as operators such as FanDuel and DraftKings surpass the 20-million bet threshold.

The Sports Betting Alliance (SBA), whose members include BetMGM, DraftKings, FanDuel, and Fanatics, had voiced opposition to the per-wager charge. Operators responded by introducing transaction fees and increasing minimum bet amounts across the state.

Johnson’s 2026 budget proposal

Against this backdrop, Mayor Brandon Johnson has proposed a 10.25% local tax on adjusted gross sports betting revenue as part of his $16.6 billion “Protecting Chicago Budget” plan for fiscal year 2026. The proposal, which requires City Council approval, is projected to generate about $26 million annually.

“To make Chicago more affordable for working families, the Protecting Chicago Budget advances a fair and balanced revenue strategy—one where everyone contributes in line with their capacity,” Johnson said. “Based on our citywide Budget Engagement Survey results, residents prioritized new revenues from a community safety surcharge, online sports wagering, and increased vacant building fees.”

The proposed measure forms part of a broader strategy to close a $1.15 billion shortfall without increasing property taxes.

Task force recommendations

Johnson’s proposal follows guidance from the Chicago Financial Future Task Force, which provided a series of recommendations to address the city’s projected budget gap.

However, the group had earlier recommended a per-wager surcharge instead of a percentage-based tax. The group’s Options for Chicago’s Financial Future report suggested a 50-cent fee on every online wager placed within city limits, estimating up to $17 million in potential annual revenue.

The task force projected that about 98% of sports betting activity in Chicago occurs online, with 20% of all Illinois online wagers placed in the metropolitan area. The estimate included a 10% loss rate based on the possibility that bettors could avoid a local tax.

Implementation pathway

To enact the proposed local levy, the city’s budget process requires departments to submit their budget requests to the Office of Budget and Management (OBM), which will then publish a forecast. The mayor’s recommendations are subsequently presented to the City Council, where the Committee on the Budget and Government Operations will hold hearings. The budget needs approval from at least 26 of the 50 elected alderpersons before it can take effect.

Possible political trade-offs

There is no assurance the sports betting tax will appear in the final version of the budget. Discussions within the council may involve alternative gaming measures, including the potential introduction of video gaming terminals (VGTs). Johnson has stated his opposition to allowing VGTs in Chicago, citing their potential impact on existing casino agreements.

Under a Host Community Agreement, Bally’s is obligated to pay the city $4 million annually for its River West casino project. Johnson’s budget projects $44 million in tax receipts from Bally’s once its permanent site opens in late September.

Bally’s temporary casino at Medinah Temple in River North has generated $11.4 million in tax revenue through September 2025, falling short of the city’s $35 million annual forecast. It produced $16.1 million in 2024, according to budget documents.

If approved, Chicago’s proposed 10.25% local wagering tax would bring the effective rate for top operators in Illinois to more than 50% when combined with the state’s maximum 40% AGR levy. The measure would also align Chicago with other jurisdictions using gambling-related taxes as part of long-term revenue strategies to address fiscal challenges.