Sportsbooks File Suit Over Chicago Sports Betting Tax

Chicago’s new sports betting tax has been on hold, at least temporarily, by a lawsuit filed on behalf of some of the biggest online sports betting sites in the US market. The Sports Betting Alliance has filed a lawsuit in Cook County Court. The suit is designed to bring a halt to the next 10.25% tax on revenue earned from online sports bets placed within Chicago city limits.

The new tax is part of Chicago’s 2026 budget. It was to take effect on January 1, but for the time being, the new levy is being put on hold.

The Sports Betting Alliance represents some of the major players in the US online sports betting industry. They include FanDuel, DraftKings, BetMGM, Bet365, and Fanatics Sportsbook.

Lawyers representing the SBA originally sought a temporary restraining order against the new tax. That motion was withdrawn, but the lawsuit continues to go forward.

In the suit, lawyers representing the SBA claim that the new tax “represents an unconstitutional assertion of authority that rests exclusively with the State.”

It’s also argued that there are no parameters in place to oversee this new tax levy. The suit claims that city plans “do not establish a review framework, specify application criteria, set processing timelines, or identify enforcement mechanisms associated with the licensing process.”

None of the claims has been proven in court.

SBA suit claims Chicago tax will drive bettors offshore

Facing the burden of an additional tax, the suit argues that bettors will be left with no alternative but to turn to illegal offshore sports betting sites to get action.

“Chicago bettors who lack legal means to place online sports wagers will be driven to illegal sports wagering alternatives readily available on the internet and through local bookies, which lack State oversight and consumer protections,” the suit alleges. “Those alternatives are untaxed, therefore depriving Illinois and, derivatively, Chicago of significant revenues under existing State tax laws.”

The SBA fears that this tax plan is short-sighted and could lead to the derailment of what has proven to be quite the cash cow for the Windy City.

Last year, the 15 online sports betting sites in Illinois earned in excess of $1.1 billion in revenue from wagers from January through October, the most up-to-date data available.

That led to $365 million in state taxes being paid, of which $11.9 million went to Cook County, the Chicago area, via the 2% cut it gets from all betting revenue earned within its boundaries.

The state of Illinois already increased the tax cut taken from sports betting in 2025. State lawmakers are also arguing against the proposed Chicago city tax, pointing out that all gambling in the US is licensed and regulated by state governments.

State Rep. Dan Dekich, chair of the House Gaming Committee, introduced a bill late last year that would create a law prohibiting municipalities from imposing any sort of sports betting tax. Lawmakers will consider that proposal when the state legislature reconvenes in mid-January.

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