Chicago 2026 Budget to Incorporate Tax on Sports Betting

Chicago will introduce a 10.25 percent tax on sports betting revenue starting January 2026, aiming to boost city funds. Experts warn the lack of a clear licensing system may create challenges for operators and could affect the local betting market significantly.

Chicago, IL December 23, 2025: Mayor Brandon Johnson announced on Tuesday that he will neither sign nor veto the citys $16.6 billion budget passed over the weekend. A key component of the budget is a 10.25% tax on the revenue generated by sports betting operators based in the city, which is set to go into effect on January 1, 2026. This proposal was initially introduced by Johnson in his October budget plan, but it gained momentum after the City Council rejected his proposal for a corporate head tax. The council, composed of 50 aldermen, eventually adopted an alternative budget that retained the sports betting tax.

Potential Challenges for Operators

The introduction of this tax could pose significant operational challenges for the 10 mobile sports betting operators currently active in Illinois. Experts have pointed out that the ordinance lacks a licensing framework, which may prevent operators from complying with the new tax obligations. The Sports Betting Alliance (SBA) has voiced strong objections to the tax, issuing a letter to Mayor Johnson warning that operators could be forced to cease operations in Chicago due to the lack of a clear licensing process. According to the ordinance, operators must possess licenses to operate, but no clear path for acquiring them has been outlined.

Furthermore, when combined with the state and county taxes, the effective tax rate on all Chicago-based sports betting operator revenues could reach a minimum of 32.25%. This includes the city tax, state taxes, and a county tax, each with its own set of requirements and rates.

Tax Breakdown

• City tax: 10.25% of operator revenue
• State tax: Progressive rates ranging from 20% to 40%, depending on annual revenue thresholds
• Cook County tax: 2% on all county-based revenue

Political and Legislative Considerations

The imposition of this tax is expected to face legal challenges from state lawmakers. In October, Illinois State Representative Daniel Didech, who chairs the House Gaming Committee, introduced a bill aimed at preventing local governments from levying taxes or imposing regulations on sports betting operations. In a similar move, State Senator Patrick Joyce has proposed a bill to reduce Chicago's share of the Local Government Distributive Fund by the amount the city raises from the sports betting tax. If either of these legislative efforts succeeds, they could significantly reduce or even eliminate the sports betting tax imposed by Chicago.

Expert Opinion

According to Crain's Chicago Business, legal experts have raised concerns that the city's plan could lead to the shutdown of sports betting operations unless the licensing issue is addressed promptly. Additionally, financial analysts warn that the combined tax burden from the city, county, and state could make Chicago a less attractive market for sports betting companies. The lack of a coherent licensing structure, along with the high effective tax rates, could discourage potential investors from operating in the city, undermining the city's goal of generating revenue from this sector.

This is a breaking news story, and updates will be provided as new information becomes available.

Sources:

• Crain's Chicago Business
• Chicago Tribune
• WBEZ Chicago
• Chicago 2026 Budget Set To Include Sports Betting Tax