Illinois Targets Online Sports Betting with New Transaction-Level Tax: Here’s What It Means for Operators and CPAs

Starting September 1, 2025, Illinois will roll out a first-of-its-kind state-level tax on individual sports wagers an aggressive new revenue move aimed at the booming online gambling industry.

The law, passed as part of the state’s 2025 budget package, imposes a flat surcharge on every bet placed through digital sportsbooks like FanDuel, DraftKings, and Caesars.

Critics argue the tax will hurt casual bettors and distort the economics of online wagering. But for Illinois lawmakers, it represents a direct, scalable way to capture revenue in a fast-growing market.

How the New Tax Works

Under the law:

• Sportsbooks must pay a $0.25 tax per wager for the first 20 million annual bets

• After that, the rate jumps to $0.50 per wager

• The tax applies regardless of bet size, outcome, or odds

• Applies only to digital bets placed by Illinois residents

For reference: FanDuel alone processed over 200 million U.S. bets in 2024, suggesting the 20M cap will be quickly exceeded.

FanDuel has already announced it will pass the tax directly onto users, likely via “wager fees” or lower payout odds. Others are expected to follow.

Strategic Concerns for Tax Professionals and Operators

1. Unusual Structure: Not Revenue-Based

Unlike gross receipts or net profit taxes, this is a fixed, per-transaction levy—meaning:

• It hits low-dollar bets proportionally harder

• Operators must build new wager-level tax logic

• Even losing bets generate tax liability

2. Compliance Complexity

Sportsbooks must:

• Track bets by user jurisdiction

• Apply proper rate once 20M threshold is exceeded

• Adjust reporting systems to align with Illinois DOR requirements

Tax professionals working with gambling operators or entertainment platforms must ensure real-time integration of tax rules into front-end systems.

3. Consumer Backlash and Behavioral Risk

Passing the tax to consumers raises concerns:

• Will recreational bettors cut back?

• Could this drive traffic to illegal offshore betting markets?

• Will users migrate to states without such fees?

  
  

Broader Policy Context

Illinois is one of several states exploring ways to tax digital entertainment directly at the point of use:

State	2025 Initiative
New York	Considering “micro-transaction” tax on daily fantasy sports entries
California	Studying per-play streaming tax for video and gaming
Ohio	Proposed tiered sports betting tax (based on volume)

For policymakers, these models offer predictable revenue streams even when profits fluctuate.

Final Thoughts

Illinois’ new sports betting tax sets a precedent for taxing high-frequency digital transactions. While it may help shore up the state’s budget, it creates both compliance challenges and economic distortion for operators and potentially consumers.

Tax professionals advising in iGaming, fintech, or consumer digital industries should watch closely. The structure of this law could become a blueprint for future state‑level digital excise taxes.

At Bizora, we help firms and platforms stay ahead of state tax developments with real-time tracking, multi-jurisdictional compliance updates, and transaction-level modeling.