The Chicago City Council, seeking to address a projected $1.2 billion budget deficit, is considering a new municipal tax on online sports betting.
The proposal, which would follow a series of state-level tax increases, is part of a broader effort to expand local revenue through gaming-related streams.
City Council eyes revenue from betting sector
At a meeting in the Chamber, Council members discussed the current tax structure and possible negotiations with the state to obtain more revenue.
Councilwoman Jeanette Taylor emphasized the urgency of action, especially in combating illegal lottery machines. According to her, these machines overwhelm the city’s African-American communities.
However, while regulating these machines is challenging, taxing mobile sports betting would be a more politically viable and profitable solution. “People download and play them all the time. We should be able to make money from them,” Taylor said.
When Taylor raised the issue of a city tax on online sports betting, Chicago’s finance director, Jill Jaworski, revealed that Mayor Brian Johnson’s administration has already “done the analysis” about imposing a local tax on online sports betting platforms.
No further details are available on the proposed tax amount. For reference, Chicago currently levies a 2% tax on gross gaming revenue from retail sports betting within city limits.
Estimates indicate that the city brings in approximately $400,000 to $500,000 in annual revenue. Considering that mobile sports betting accounts for over 90% of all betting activity, a tax on mobile platforms could generate millions for the city.
New municipal tax follows state increases
A municipal tax would be another blow to mobile sports betting, which is already feeling pressure from recent changes in state policy.
In 2024, Illinois replaced its flat 15% tax rate with a progressive, revenue-based system. This resulted in a 15% to 40% increase for top platforms like FanDuel and DraftKings.
This year, Illinois lawmakers voted for another increase through a new two-tier tax structure. The law requires operators to pay $0.25 per bet on the first 20 million bets. After that, the tax increases to $0.50 per bet.
Operators reacted quickly. Market leader FanDuel responded by announcing a $0.50 surcharge on all bets starting September 1st. DraftKings and Fanatics followed suit, with $0.50 and $0.25 per bet, respectively.
Others, like BetMGM and Hard Rock Bet, have taken a different approach, implementing minimum bet limits.
Legalization of VGT on the agenda
Online sports betting isn’t the only gaming proposal being discussed in the City Council. Another hotly debated revenue source is electronic gaming terminals (VGTs).
Visually, VGTs resemble casino slot machines, but they are available in a variety of retail establishments, including restaurants, bars, and other establishments. Illinois legalized the machines in 2012 with the passage of the Video Gaming Act.
The legislation allowed municipalities to choose whether or not to allow the use of the machines, with Chicago being a notable resister. However, City Council members are now pushing to change that.
Representatives Gilbert Villegas and Anthony Beale have proposed two ordinances. One would allow the use of the machines at Chicago’s O’Hare and Midway airports, and the other citywide.
Villegas’ proposal includes the introduction of up to 400 VGTs beyond the security checkpoints at both airports. Meanwhile, Beale wants to allow the machines to circulate throughout the city, resulting in thousands of VGTs. Council members estimate the machines could generate millions of dollars in annual revenue for the city.
However, Jaworski fears that introducing VGTs would hurt slot machine revenue at Bally’s Chicago, currently under construction. The CFO cited an analysis that VGTs would generate at most $10 million, four times less than slot machines.
Despite differing opinions on how to generate additional revenue streams for the city, there is consensus on one point: it needs them quickly.
Whether through a municipal tax on mobile sports betting, legalization of VGTs, or a combination of both, gambling is at the center of Chicago’s fiscal strategy.
