In the wake of the Illinois Senate approving a sports betting tax hike, sportsbook operators are wondering whether other states, such as Ohio, might follow suit.
Since its inception, the tax rate for Illinois sports betting has been 15%. However, the Senate just approved a budget that would start the tax rate at 20%. And that rate could increase as high as 40% depending on how successful an operator is.
The current Ohio sports betting tax rate is 20%. That’s double the 10% that was in effect when sports betting was first legalized.
Sportsbooks in Illinois, New Jersey, and beyond are resisting these tax hikes. If Ohio were to increase its sports betting tax rate again, the same would almost certainly be true.
Illinois & New Jersey are already taking steps to increase the sports betting tax rate on operators
Illinois Senators already approved the 2025 budget which includes the new sliding scale sports betting tax rate.
The bill to accomplish this goal is known as HB 4951 and it could lead to a tax rate as high as 40% for the most successful operators in Illinois. For operators who hit that upper echelon tax bracket, the tax rate will be the second highest in the country. Only New York’s 51% tax rate on retail sportsbooks would be higher.
This is how the scale breaks down:
- Operators with AGR under $30 million would be taxed at 20%
- Operators with AGR from $30 million to $50 million would be taxed at 25%
- Operators with AGR from $50 million to $100 million would be taxed at 30%
- Operators with AGR from $100 million to $200 million would be taxed at 35%
- Operators with AGR over $200 million would be taxed at 40%
That is a substantial tax hike from the original 15% operators have been paying to operate in the Prairie State.
The only other state with a similar taxing system is Arkansas. Operators pay 13% in taxes for under $150 million of gaming revenue. That increases to 20% if an operator exceeds that threshold.
New Jersey is also looking to bump up its sports betting tax rate. The bill pointed at that goal is known as Senate Bill No. 3064 and was introduced by New Jersey Sen. John F. McKeon. It proposes increasing the tax rate from 13-15% to 30%.
Ohio already doubled its sports betting tax rate last summer — could it happen again?
It seems unlikely that Ohio will increase its sports betting tax rate soon, as it already doubled it about one year ago. However, the appeal of more tax money could very well incentivize regulators to asses this rate once again.
If Ohio were to follow Illinois and New Jersey, it would be the second increase since July 2023, when it doubled the tax rate from 10% to 20%. That jump came just six months after launching legal sports betting in the Buckeye State, and it was met with heavy resistance from operators.
Eventually, operators gave in and accepted the 20% tax rate despite not agreeing with the reasoning. The Sports Betting Alliance, which consists of many major operators, released a statement from spokesman Nathan Click via SBC Americas stating their hesitant acceptance.
“By every measure, legal online sports betting has been a huge success for Ohioans. Even before this change, tax revenue generated for the state in just the first few months since legalization has exceeded expectations. While we strongly disagree with this decision, sports betting’s success in Ohio demonstrates the promise of creating a safe and regulated market for online gaming – both in terms of combating illegal and unregulated gaming enterprises and providing meaningful support for state priorities. SBA member companies want to provide Ohio consumers the best product and remain competitive with illegal, unsafe and untaxed sports books, and we look forward to working with the state on a fair tax regime in order to do so.”
If Ohio lawmakers attempted to raise that tax rate again, the pushback from operators would likely be more substantial than the first time around.
Operators voice heavy opposition to sports betting tax rate increases
If Ohio did attempt to raise its tax rates on sports betting operators again, the resistance could be even more dramatic than what is playing out in Illinois.
According to SBC Americas, the Sports Betting Alliance, via President Jeremy Kudon, has already stepped out and called the Illinois sports wagering tax hike bill an “extremely disappointing decision that will cause real harm.”
Kudon also vocalized that some Sports Betting Alliance members could rethink investments in the Illinois sports betting market. That could, in turn, give way to illegal operators rising up once again.
Kudon reasoned:
“This tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers – not to mention provide a massive leg up to dangerous, unregulated and illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations.”
“Sportsbooks across the industry will have no choice but to reevaluate their level of investment and participation in the state should this become law.”
