Chicago is getting ready to impose a brand new municipal tax on sports activities betting income after town’s 2026 funds cleared the approval course of with out direct motion from the mayor. The $16.6 billion spending plan, handed by the Chicago City Council, features a 10.25% levy on sportsbook income generated inside metropolis limits, scheduled to take impact on January 1. Mayor Brandon Johnson confirmed he would neither signal nor veto the funds, permitting it to turn into regulation by default beneath metropolis guidelines.
The tax emerged from a revised funds course of that shifted management away from the mayor’s unique proposal. Johnson first launched the sports activities betting levy in October as a part of broader efforts to handle town’s funds. However, aldermen rejected his name for a company head tax and as an alternative superior another funds that preserved the sports activities wagering provision. As a outcome, the city-level tax now strikes ahead with out a transition interval or delayed implementation.
Layered Tax Structure Raises Operator Costs
Once in pressure, the Chicago levy will add one other layer to an already advanced tax framework dealing with licensed sportsbook operators in Illinois. At the state degree, Illinois operates a progressive tax system on sports activities betting income, with charges beginning at 20% and rising to 40% as soon as operators exceed outlined annual income thresholds. Cook County, which incorporates Chicago, already applies a 2% tax on sportsbook income.
With the extra 10.25% metropolis tax, the minimal mixed price on Chicago-based operator income will attain 32.25%. For massive nationwide operators projected to cross the $200 million state income threshold, the efficient price on income tied to Chicago wagers might exceed 50% for important parts of the fiscal yr. FanDuel and DraftKings are among the many operators anticipated to succeed in that higher state tax bracket throughout December, which might push their whole tax publicity on city-generated income to not less than 52.25% for greater than half of the yr.
The total tax burden has elevated additional since Illinois launched a per-wager surcharge in July beneath the FY 2025–26 state funds. Under that system, sportsbooks pay $0.25 on every of their first 20 million bets and $0.50 on each wager past that threshold. Operators have largely handed these prices on to prospects, and state information present that wagering quantity has declined at the same time as whole income has continued to develop. Despite these developments, Illinois nonetheless recorded a document $1.6 billion sports activities betting deal with in October, in keeping with figures launched by the Illinois Gaming Board.
Licensing Language Creates Uncertainty
Beyond the tax price itself, the Chicago ordinance has drawn consideration for its licensing necessities. The funds language requires companies or people accepting sports activities betting wagers to carry a city-level license. That provision is anticipated to use to on-line sportsbooks working inside Chicago, together with main manufacturers akin to DraftKings, FanDuel, BetMGM, and bet365.
The ordinance doesn’t embrace a transparent framework outlining how operators can get hold of the required metropolis licenses. This omission has prompted warnings from trade representatives that sportsbooks might face compliance challenges and even be compelled to droop exercise throughout the metropolis whereas regulatory particulars are resolved.
According to InGame, the Sports Betting Alliance cautioned in a letter despatched to metropolis officers forward of the funds’s passage, that the absence of an outlined licensing pathway might place operators in a tough place. In a public assertion, the group stated:
“The new Chicago tax on sports wagering will drive more sports fans to illegal, predatory websites and bookies that are thriving online without any oversight or consumer protections, while avoiding tax obligations entirely. Further penalizing players in the City of Chicago pushes more sports fans to unregulated, illegal alternatives and has serious implications for the sustainability of the legal market.”
The alliance additionally urged metropolis leaders to rethink the timing of implementation, stating:
“We urge city leaders to delay the new online sports betting license infrastructure given the extremely truncated timeline caused by the budget process. The new licensing process creates regulatory hurdles that could significantly constrain sportsbook operations in Chicago and may force companies to explore all legal options.”
Revenue Projections and Political Pushback
City officers estimate the brand new sports activities betting tax will generate roughly $26.3 million yearly. That projection is predicated on the idea that Chicago accounts for roughly 40% of sportsbook income generated throughout Cook County, utilizing 2024 figures as a benchmark. Applying that very same share to the $610.5 million in Cook County adjusted gross income reported in the course of the first ten months of 2025 suggests town would have collected about $25 million over a comparable interval.
Some forecasts place whole new tax income even increased when mixed with different measures within the funds. Chicago’s 2026 plan additionally anticipates $6.8 million in extra income from the legalization of video gaming terminals, marking the primary time the machines would function legally throughout the metropolis. The rollout of VGTs is anticipated to have an effect on the efficiency of Bally’s Chicago, the on line casino challenge scheduled to open within the second half of 2026.
At the state degree, Chicago’s transfer has triggered resistance from lawmakers involved about fragmented playing regulation. Illinois House Gaming Chairman Daniel Didech launched laws in October that might bar native governments from taxing or regulating playing actions, limiting the usage of residence rule authority on this space. Separately, State Senator Patrick Joyce has filed a invoice that would scale back Chicago’s share of the Local Government Distributive Fund by an quantity equal to any income town raises from a sports activities betting tax.
Neither proposal has superior to a vote, however their introduction highlights ongoing rigidity between metropolis and state officers over management of playing coverage and income allocation. Meanwhile, operators proceed to evaluate how the mixed impact of state surcharges, progressive tax charges, and the brand new Chicago levy will form the economics of regulated sports activities betting in one of many nation’s largest city markets.
