Chicago’s newly approved 10.25% sports betting tax took effect on January 1, 2026, as Mayor Brandon Johnson allowed the city’s $16.6 billion budget to become law without signing it. Johnson stated, “In this moment I will not add the risk and speculation of a government shutdown to the profound worries Chicagoans face.” The budget also included taxes on social media amusement, liquor, and checkout bags, adding new revenue streams for the city amid rising fiscal pressures.
Legal Challenges From Sportsbooks
The sports betting tax adds to Illinois’ already high levies on wagering, which include a graduated 20%–40% rate on adjusted gross revenue and a per-wager fee introduced last year.
Operators represented by the Sports Betting Alliance (SBA)—DraftKings, FanDuel, BetMGM, Bet365, and Fanatics—filed a complaint in Cook County court. They argued that Chicago lacks the constitutional authority to impose a local tax or require city-issued licenses, stating that only the General Assembly can grant such powers to a home rule unit. The SBA initially sought an injunction to block enforcement but withdrew it after the city issued the required licenses, allowing sportsbooks to continue operations while the dispute remains unresolved.
State Lawmakers Push Countermeasures
Illinois legislators are moving to curb municipal taxation. Rep. Dan Didech, chair of the House Gaming Committee, filed HB 4171, which would prevent cities from creating independent sports betting taxes. Didech said, “Chicago’s proposal will hurt consumers, drive vulnerable people to predatory illegal markets and reduce state tax revenue.”
Meanwhile, Sen. Patrick Joyce introduced legislation to reduce Chicago’s allocation from the Local Government Distributive Fund by the amount raised from the sports betting tax, redistributing it to other counties to maintain revenue neutrality for the state. These bills aim to balance municipal authority with statewide fiscal policy.
Industry And Fiscal Concerns
The Illinois legislature has steadily increased taxes on sportsbooks over the past two sessions. In 2024, the flat 15% rate was replaced with a graduated 20%–40% structure based on operator revenue. Last year, lawmakers added a per-wager fee, prompting sportsbooks to find mitigation strategies.
At a recent National Council of Legislators from Gaming States conference, Rep. Jehan Gordon-Booth highlighted potential consequences, saying, “[Lawmakers] need to understand, what you think you’re going to get from raising taxes, you’re not going to get. We want this industry to continue to strike the right balance. This will be a problem in budgets for the foreseeable few years in budgets. I don’t want to see us continue to deteriorate the industry.”
The Chicago tax was first proposed by Mayor Johnson in October 2025 after his corporate head tax plan failed. The city council advanced an alternative budget retaining the 10.25% levy and requiring operators to hold city-issued licenses. Some sportsbooks warned they might leave the city if the tax went into effect, though they continued operations once licensing was clarified. The levy is projected to generate approximately $26.3 million annually and adds another layer of financial complexity to Illinois’ rapidly evolving sports betting market.
Source:
“Chicago sports betting tax takes effect as Illinois operators sue”, igamingbusiness.com. January 5, 2026
The post Chicago Sports Betting Tax Starts As Operators Challenge Legality first appeared on RealMoneyAction.com.