Low Tax Rates 'Key' For Sports Betting Success In Illinois

May 16, 2019

One year after the U.S. Supreme Court allowed states outside of Nevada to set up their own sports betting rules, some experts are offering Illinois lawmakers tips as a final proposal is drafted. 

There is no “perfect” model to follow, but experts say one downfall is high tax rates. Under the current Illinois plan, sports books operators would be taxed at 25 percent on their earnings --- almost 4 times higher than Iowa. Nevada has allowed legal sports gambling for decades and its tax rate is 6.75 percent. 

David Forman, senior director of research with the American Gaming Association said high rates could impact sportsbooks and their bottom lines --- especially when they are already running on very thin margins.  That, in turn, creates less attractive betting lines for bettors. 

“And we get into a more negative experience for consumers and potentially keeping them from jumping from that illegal market to the legal market,” he said.

Indiana and Iowa recently legalized sports gambling and some lawmakers are feeling the pressure to move quickly. 

But Keith Miller, gaming law professor at Drake University, said the real competition is found with offshore bookies in the black market --- and not necessarily with neighboring states. 

“They (offshore bookies) are able to price their products at a very attractive level and it really presents a challenge, when you have as many taxes, license fees, integrity fees and all of these things that are in these proposals, to have sports books operators in Illinois be able to make money.”

Also under the current Illinois plan, professional sports leagues could receive a small integrity fee, which no other state has done. 

During a subject matter hearing on the issue last week, the measure’s leading sponsor, state Rep. Mike Zalewski (D- Riverside), said it’s easier to start off with higher taxes and lower them as needed.

Legalizing sports gambling is expected to be part of a larger gambling expansion proposal that would include more casinos.