Illinois Sports Betting Tax Increase 'Illogical' Says Circa Boss

The recent passage by the Illinois General Assembly of a per-bet fee on sports wagers taken by licensed sportsbooks has been widely criticized by sportsbook operators and industry captains. The new tax, which goes into effect on July 1, imposes an additional charge of 25 cents per bet for the first 20 million wagers and then a 50-cent charge for every bet placed with the licensee thereafter.

This charge comes following last year’s Illinois sports betting tax hike from a flat 15% rate to a tiered system ranging between 20% and 40% annually. The change, which was hastily passed as part of Illinois' overall budget proposal, has triggered concerns over its impact on both operator sustainability and consumer experience.

Sportsbook executives and industry representatives have strongly criticized the provision, calling it economically harmful and structurally flawed. Circa CEO Derek Stevens was blunt in expressing his opinion regarding the policy when he appeared on the Vegas Stats & Information (VSiN) Network's "Follow the Money" Podcast.

Stevens bluntly attacked the rationale for the tax, describing it as "not a good, logical, well-thought-out design." Although later he softened his tone, citing the imperative to maintain a preferred license, Stevens was not reluctant to spell out the business consequences for Circa Sports and other sportsbook operators licensed in Illinois. 

Stevens explained that the flat per-wager fee would be especially burdensome for books offering low-stakes betting options or operating thin profit margins. He warned that bets of $1, $2, or $5, popular among recreational bettors, will soon become economically prohibitive for Illinois sports betting apps.

The new tax system can compel the sportsbooks to implement minimum wager requirements, possibly at $10, to be financially viable. He further noted that after deducting the federal excise tax and other expenses associated with licensing from the professional leagues, not much is left for profit under the new system.

New tax could help offshore sportsbooks

In general, Stevens was concerned with the competitiveness and integrity of the market in the future. He argued that the new tax regime would have the effect of unwittingly assisting illegal and offshore bookmakers who, not subject to regulatory expenses, can continue offering enticing odds and minimum bets. Lucrative Illinois sportsbook promos might not be enough to keep bettors operating in the legal market if minimum wager requirements are implemented.

For him, the shift in the Illinois tax bill could tip the playing field in a direction that causes customers to drift from legal and regulated sites to unregulated ones.

Industry organizations joining the choir 

The Sports Betting Alliance (SBA), a lobbying body made up of the best sports betting site operators, also issued a public statement against the new tax. The coalition deemed the per-bet charge "crippling" and accused lawmakers of approving the policy without adequate notice or examination of its anticipated effects.

The SBA release warned that the increased cost of doing business would lead to reduced promotional offers, more restrictive odds, and higher minimum bets for consumers. It also challenged the constitutionality of the new tax, labeling it as "punitive" and potentially discriminatory.

The per-bet tax is imposed on top of a newly revamped graduated levy on gross sports betting revenue of between 20% and 40% on an operator's hold. Cumulatively, the taxation measures place Illinois among the most taxed sports betting jurisdictions in the country. Industry stakeholders have warned that the cumulative impact has the potential to dampen future investment and innovation in the state's gambling space.