Chicago’s New Sports Betting Tax Raises Questions Over Pricing and Market Access in Illinois

Chicago’s decision to introduce a new city-level tax on sports betting revenue is prompting renewed scrutiny of how Illinois’ betting market will function as costs continue to rise. The 10.25% municipal tax, included in the city’s 2026 budget and set to take effect on January 1, adds to a growing list of charges sportsbooks face when operating in one of the most expensive regulated betting states in the US.

While the tax applies only to revenue generated within Chicago, its impact is expected to extend beyond city limits, particularly for major sportsbooks that rely heavily on the Chicago market for betting volume.

Illinois’ Sports Betting Costs Continue to Climb

Illinois already operates under a progressive state tax system for any type of sports bet, with rates ranging from 20% to 40% depending on annual adjusted gross revenue. Cook County imposes an additional 2% tax on sportsbook revenue, and the state introduced a per-wager surcharge in mid-2025.

Under that surcharge, sportsbooks pay $0.25 per bet on their first 20 million wagers each year and $0.50 per wager beyond that level. Combined with Chicago’s new levy, sportsbooks operating in the city will face layered costs that significantly exceed those in many other US markets.

For high-volume operators, total effective tax and fee exposure on Chicago-based wagering could exceed 50% during peak periods, particularly around major sporting events.

What Higher Taxes Mean for Sportsbook Pricing

In markets with rising tax burdens, sportsbooks typically adjust pricing models rather than exit outright. That can include narrower margins, changes to promotional structures, or reduced flexibility in live betting markets.

Recent Illinois betting data suggests this shift may already be underway. While total sports betting revenue has continued to increase, the number of wagers placed statewide has declined, indicating that bettors are placing fewer bets at higher average stakes.

For users, these trends often manifest as lower odds, higher minimum wagers, and tighter in-play betting limits, especially during high-volume betting windows.

City Licensing Rules Add a Layer of Uncertainty

Beyond taxation, Chicago’s 2026 budget introduces new language requiring any site accepting sports betting wagers within the city to obtain a city-issued license. The requirement is expected to apply to online sportsbooks already licensed at the state level.

However, the budget does not specify how those licenses will be issued or administered. Until regulatory guidance is clarified, sportsbooks may need to reassess how they manage access for users located within Chicago to remain compliant once the rules take effect.

Chicago’s Role in the Wider Illinois Betting Market

Chicago accounts for a significant share of Illinois’ sports betting activity, making the city a critical market for both online and retail sportsbooks. City officials estimate the new tax could generate roughly $26 million annually, based on Chicago’s share of Cook County sportsbook revenue.

The tax forms part of a broader revenue strategy tied to the city’s 2026 budget, which also includes plans to expand video gaming terminals ahead of the opening of Bally’s Chicago casino later in 2026.

State Lawmakers Signal Concern Over Local Control

Chicago’s move has also drawn attention in Springfield, where proposed legislation would limit municipalities' ability to impose their own gambling taxes or licensing requirements. One proposal would centralize sports betting regulation at the state level, while another would offset Chicago’s share of state-distributed funds by the amount raised through the city tax.

Neither measure has advanced to a vote, but their introduction underscores ongoing debate over whether local governments should regulate and tax sports betting in Illinois.

Market Watches Next Steps

As the January 2026 implementation date approaches, sportsbooks operating in Illinois are evaluating how higher taxes, per-bet fees, and new local licensing rules will affect pricing, market access, and long-term investment decisions.

For bettors, the changes are unlikely to result in immediate disruptions. Over time, however, higher operating costs could shape how competitive Illinois’ sports betting market remains compared with other regulated states.