Chicago Sportsbooks Drop Bid to Halt 2026 City Tax as Legal Battle Continues
The Sports Betting Alliance (SBA), representing major sportsbooks such as Bet365, BetMGM, DraftKings, FanDuel, and Fanatics Betting & Gaming, has dropped its emergency bid to block Chicago's new 10.25% local tax on sports betting, effective January 1, 2026. This decision allows sports betting to continue uninterrupted, though the constitutional lawsuit against the tax and licensing framework proceeds. According to The Gaming Boardroom, this tax is in addition to Illinois' existing state taxes, which include a graduated rate of 20% to 40% on adjusted gross revenue and a per-wager fee.
📌 Key Takeaways
- Sportsbooks drop bid against 10.25% tax.
- Lawsuit challenges Chicago's tax authority.
- Hearing set for March 2026.
Chicago Implements 10.25% Sports Betting Tax in 2026
Chicago's decision to implement a 10.25% local tax on sports betting, as part of its 2026 budget, has sparked significant controversy and legal challenges. The tax applies to adjusted gross receipts from all sports bets placed within city limits, adding to the substantial tax burden already faced by operators under Illinois state law. The state levies a graduated tax rate ranging from 20% to 40% on adjusted gross revenue, as well as a per-wager fee introduced last year. According to Yogonet, this move has prompted major operators to consider their future in the Chicago market.
Sportsbooks File Lawsuit Against Chicago's Tax Authority
The lawsuit, filed by the SBA in Cook County Circuit Court, argues that the city of Chicago lacks constitutional authority to impose such a tax. According to CBS News, the lawsuit claims that under the Illinois Sports Wagering Act, local governments are not authorized to impose additional taxes or require separate local licenses. While the SBA dropped its request for a temporary restraining order, the lawsuit challenging the constitutionality of the tax and licensing requirements will proceed, with a hearing set for March 2026.
Potential Impact on Chicago's Sports Betting Market
The introduction of the new local tax could have significant implications for Chicago's sports betting market. Industry analysts suggest that the 10.25% tax could deter operators from maintaining a presence in the city, potentially driving bettors to illegal offshore sites. According to Betting.net, this could result in a loss of both state and city revenue. Moreover, state lawmakers are considering measures to either block the tax or offset city revenue, reflecting the contentious nature of the issue.
Industry analysts suggest that the 10.25% tax could deter operators from maintaining a presence in the city.
State Lawmakers Weigh Response to Chicago's Tax Move
In light of the legal challenges and potential market impacts, Illinois state lawmakers are evaluating possible legislative responses to Chicago's new tax. As reported by AffPapa, bills have been introduced that aim to block the local tax or reduce state distributions to Chicago as a countermeasure. This legislative activity underscores the broader debate over the balance of taxing authority between state and local governments in the context of sports betting.
Future Implications for Online Betting Operators
As the lawsuit and legislative responses unfold, the future of online sports betting in Chicago remains uncertain. If the court rules against the city, it could set a precedent limiting local governments' ability to impose additional taxes on top of state levies. On the other hand, if the tax is upheld, it may lead to increased costs for operators and potentially higher prices for consumers. As the situation develops, stakeholders across the industry will be closely monitoring the outcomes of both the lawsuit and legislative efforts. According to CBS News, a resolution is expected later in 2026, which will be pivotal for the future of sports betting in the city.