Starting January 1, 2026, Chicago will implement a new 10.25% tax on sports betting revenue generated within city limits. The measure became law by default after Mayor Brandon Johnson declined to sign or veto the city’s 2026 budget ordinance.
The tax is embedded within a larger $16.6 billion budget package approved by the City Council, following a standoff over the mayor’s initial proposal for a corporate head tax.
A Layered Tax Burden
This new municipal levy adds significant weight to an already complex tax structure for Illinois operators. The 10.25% city tax sits on top of the state’s progressive tax rate, which ranges from 20% to 40%, and a separate 2% tax imposed by Cook County.
Industry analysts warn that for major operators hitting the top state tier, the combined effective tax rate on Chicago-generated revenue could exceed 50%. Such a steep burden risks altering the economics of the regulated market, potentially forcing operators to reduce promotional spending and innovation.
Licensing Limbo and Industry Concerns
Beyond the financial impact, operators are facing regulatory uncertainty. The Sports Betting Alliance has flagged a critical flaw in the ordinance: it requires sportsbooks to hold a city-level license but provides no clear pathway to obtain one.
“The ordinance creates a requirement to be licensed at the city level but does not establish how an operator can secure that license,” the Alliance noted, warning that this ambiguity could force companies to suspend operations in the city.
Furthermore, stakeholders argue that the tax hike could drive players toward the black market. “The new tax risks pushing players toward illegal and unregulated sportsbooks that do not pay taxes or provide consumer protections,” the Alliance stated.
State-Level Pushback
The move has also sparked tension with state lawmakers. Proposals have been introduced in Springfield to limit local governments’ authority to tax gambling or to reduce state funding to cities that impose such levies, highlighting a growing conflict over gambling revenue control.
