After the Illinois legislature passed the fiscal year 2025 budget, which includes a new sports betting tax, stocks of sports betting companies such as DraftKings, Flutter, and MGM significantly dropped on Monday, with the market reacting strongly to this new policy.
The new budget includes a key provision: a fixed tax fee on all sports bets within the state. Specifically, the first 20 million sports bets by each company in Illinois will be taxed at 25 cents per bet, and any amount beyond that will be taxed at 50 cents per bet. Governor J.B. Pritzker has indicated plans to sign the budget into law.
As a result of this news, DraftKings (DKNG) saw its stock price plummet by over 7%, while Flutter Entertainment (FLUT), the parent company of FanDuel, MGM Resorts (MGM), and Rush Street Interactive (RSI), the operator of BetRivers, also recorded varying degrees of decline. The related ETF—Roundhill Sports Betting & iGaming ETF (BETZ)—fell nearly 2%.
Citibank analysts predict that if this tax had been implemented last year, DraftKings might have had to pay an additional approximately $68 million in taxes. The analysts also noted that currently, only DraftKings and FanDuel have betting volumes exceeding $20 million in Illinois. To cope with the increased costs, operators may reduce their promotional budgets and the frequency of activities in the state.
This new tax measure is an addition to last year's progressive tax system. In 2024, Illinois already raised the sports betting tax rate from a uniform 15% to a maximum of 40%.
The Sports Betting Alliance expressed strong dissatisfaction, stating: "This is the second consecutive year that Illinois has imposed high taxes on legal online gambling operators and their millions of local customers without prior notice or assessing the destructive impact on the legal market." The organization further stated that it will continue to oppose this "selective, discriminatory" tax policy.
Amid increasing tax pressures, operators face profitability challenges, while the Illinois Department of Finance attempts to stabilize budget gaps through the legal gambling industry. The struggle between policy and market continues.
