Illinois OSB Tax Gambit Unlikely to Spur Copycat Moves, Says Analyst

• Other states unlikely to mirror Illinois plan
• Illinois requiring operators to pay 25 cents per wager on the first 20 million bets booked, 50 cents thereafter
• Sports betting stocks slipped on the news

News that the Illinois budget for fiscal 2026 contains another sports betting tax increase weighed on the related stocks Monday, but at least one analyst believes other states won’t mimic the Illinois per bet tax scheme.

Under the new plan in the Land of Lincoln, operators will pay a levy of 25 cents per wager on the first 20 million bets. That rate doubles to 50 cents per bet thereafter. Flutter Entertainment’s (NYSE: FLUT) FanDuel and DraftKings (NASDAQ: DKNG) — the largest online sportsbook operators — will bear the brunt of that tax hike and that explains why shares of both are down today. It’s possible a silver lining will emerge in that other states won’t follow the Illinois model.

“More concerning for the group than the initial tax impact is the possibility that other states could follow suit,” wrote Jefferies analyst David Katz in a report to clients today. “While this has been a bearish Street narrative, we do not expect this to occur given specific states’ history of tax policy.”

About a year ago, Illinois implemented a progressive sports betting tax hike under which the largest operators — namely FanDuel and DraftKings — pay higher rates than their smaller rivals. That stoked fears other states would follow suit and while other states did lift sports betting levies, those that did didn’t follow the Illinois model.

How Operators Can Deal with Latest Illinois Tax Increase

Tax increases on gross gaming revenue (GGR) are easier for operators to deal with because those hikes can be augmented with changes in promotional activity, but that’s not what the industry is looking at in Illinois today.

“We expect this strategy would only be pursued in conjunction among all operators,” adds Katz. “More likely, operators could offset the tax with subtle pricing changes on bets, which over time recovers the margin.”

Last year, DraftKings announced a per bet surcharge on sports wagers in Illinois, New York, Pennsylvania, and Vermont as a way of mitigating those states’ onerous taxes, but the plan was pulled when no other gaming companies went along.

iGaming Could Be More Likely Outcome in Other States

Illinois isn’t the only state needing to increase revenue, but that doesn’t imply that others will rapidly move to lift sports wagering levies. In fact, history suggests that’s not how most states do business whereas Illinois has deployed 50 tax increases since Gov. J.B. Pritzker (D) took office in January 2019. What is possible is that more states consider iGaming and the advantages of the New Jersey model of gaming taxation.

“iGaming legalization is a more logical conclusion for many state governments,” observes Katz. “We view NJ as a clear model for other states to replicate, with reasonable tax rates, continued handle (and state tax revenue) growth, and land-based participation.”

There is some chatter that the next budget in Illinois could include iGaming, which the industry would obviously favor. Conversely, some experts see Florida as the only like addition to the current roster of internet casino states between now and 2027. Connecticut, Delaware, Michigan, New Jersey, Pennsylvania, Rhode Island, and West Virginia are the states that permit iGaming.