<p><span style="font-weight: 400;">Chicago appears set to implement a 10.25% tax on sports betting operator revenue, included in the city&#8217;s $16.6 billion 2026 budget. The measure, slated to take effect on January 1, has sparked debate among local officials and </span><a href="/best-online-sportsbooks/"><span style="font-weight: 400;">US online sportsbooks</span></a><span style="font-weight: 400;">.</span></p>
<h2>Mayor Johnson Neither Signs Nor Vetoes Chicago 2026 Budget</h2>
<p><span style="font-weight: 400;">Mayor Brandon Johnson announced he would neither sign nor veto the city council&#8217;s budget, effectively allowing the sports betting tax to take effect. Johnson initially proposed a corporate head tax but lost control of the budget process. </span></p>
<p><span style="font-weight: 400;">The city council instead passed a budget retaining the sports betting tax, despite lacking a licensing framework for operators.</span></p>
<p><span style="font-weight: 400;">Critics, including the Sports Betting Alliance (SBA), warned the tax could force operators to shut down in Chicago. The SBA argued that the ordinance &#8220;does not provide a pathway&#8221; for companies to comply, potentially pushing sports fans toward other online platforms. Some state legislators have also filed bills to challenge Chicago&#8217;s ability to levy such taxes locally.</span></p>
<p><span style="font-weight: 400;">The new tax would result in a minimum 32.25% total tax on revenue for all Chicago-based operators. Illinois imposes progressive state tax rates ranging from 20% to 40% depending on annual revenue thresholds, while Cook County already collects a 2% tax on all county-based operator revenue.</span></p>
<h3>Projections for Illinois Sports Betting</h3>
<p><span style="font-weight: 400;">With the additional 10.25% city tax, the minimum combined rate on Chicago-based operator revenue will reach 32.25%. Large national operators projected to surpass the $200 million state revenue threshold could face effective rates exceeding 50% on Chicago wagers for substantial portions of the fiscal year. </span></p>
<p><span style="font-weight: 400;">FanDuel and DraftKings are expected to hit the upper state tax bracket in December, pushing their total tax exposure on city-generated revenue to at least 52.25% for much of the year.</span></p>
<p><span style="font-weight: 400;">The overall tax burden has risen further since Illinois introduced a per-wager surcharge in July under the FY 2025-26 state budget. Under this system, sportsbooks pay $0.25 per wager for the first 20 million bets and $0.50 per bet beyond that threshold. </span></p>
<p><span style="font-weight: 400;">Operators have largely passed these costs to customers, and state data indicate wagering volume has slightly declined even as total revenue continues to grow. Despite these trends, Illinois recorded a record $1.6 billion sports betting handle in October, according to the Illinois Gaming Board.</span></p>
<h3>Impact on US Online Sportsbooks</h3>
<p><span style="font-weight: 400;">The 10.25% city tax will sit on top of existing state and county taxes, effectively creating a minimum 32.25% tax burden for Chicago-based operators. The mayor&#8217;s office projected the tax could generate roughly $26.3 million in annual revenue, based on Cook County&#8217;s previous operator revenue figures.</span></p>
<p><span style="font-weight: 400;">Industry reaction indicates potential pushback from major operators like FanDuel and DraftKings, who may face effective tax rates above 50% due to progressive state taxes. The Sports Betting Alliance called for delaying the implementation of a new licensing infrastructure, citing regulatory hurdles and operational constraints.</span></p>
<p><span style="font-weight: 400;">Despite concerns, the city anticipates significant revenue from the levy while the US online sportsbooks market continues to grow. Illinois sportsbooks posted record handles in 2025, suggesting strong market activity despite higher taxation.</span></p>
<p><span style="font-weight: 400;">Chicago&#8217;s 2026 budget thus represents a critical moment for city and state gaming policy. While officials expect substantial revenue, regulatory and industry pushback could shape the city&#8217;s sports betting landscape in 2026.</span></p>
<p><span style="font-weight: 400;">The 10.25% tax underscores a broader trend of municipalities exploring local levies on gambling revenue. Lawmakers are looking to tweak the </span><a href="/usa/illinois"><span style="font-weight: 400;">Illinois gambling industry</span></a><span style="font-weight: 400;"> by balancing fiscal goals with industry sustainability. However, it has proven to be challenging for US online sportsbooks and legislators alike.</span></p>
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