Illinois, a US state, has passed a budget increasing the tax on sports betting. Illinois is almost doubling the tax rate by increasing it from 15% to 20% to 40%, with the actual collection depending on the level of adjusted gaming revenue. This has triggered speculation that other states could soon smell the coffee and follow the trend.
A higher tax rate on sports betting was first established by New York via 51% in collection. It raised several eyebrows, but in the end, it made it to the surface. It has resulted in the collection of over $2 billion. This generates curiosity in other states who want to capitalize on the rising consumer interest.
New Hampshire and Rhode Island have a tax structure that is similar to New York. Illinois would join the elite club as the state with the second-highest rate in the US.
Market analysts have said that an increase in tax rate may not immediately fetch the desired result, adding that it is more likely to blend with the market and sentiments in the next 3 to 4 years.
Activity and volume are more reasons to increase the tax rate. Both are constantly increasing in Illinois. The trend is prevalent across the US, and hence, states are considering amendments to their current sports betting tax system. New York remains a leader in the country when it comes to tax collection, betting handling, and ease of business.
Tax that Illinois collects will be allocated to increased child tax credit.
Operators have pushed back to the approved budget. They have said that an increase in tax rate will ultimately see consumers bearing the burden. They have further said that it could lead to the creation of worse products and worse promotions along with worse odds in the market. These statements have come from the Sports Betting Alliance. It consists of some of the best sports betting sites in the US – FanDuel, DraftKings, BetMGM, and Fanatics. They have also hinted that illegal or offshore operators may enter to fill the gap.
Jason Robins, the Chief Executive Officer of DraftKings, has said that the market can expect lower external marketing to create better margins. Jason is also the Chairman and Co-Founder of the platform; he believes that the consumer ultimately absorbs the cost.
Meanwhile, operator share values plummeted last week. DraftKings saw a 15% decline, while FanDuel and Penn Entertainment saw dips of 8% and 6%, respectively.
Illinois is certain to implement the revised tax rate. Considering that it is much lower than what is applicable in New York, the state has little to worry about how the market will react in the short term. If anything, the focus of Illinois would be more on long-term tax collection.