How do operators feel about the Illinois legislative change that forces sportsbooks to pay at 25 cent fee on every single wager they take?
We’ve already heard from some of the biggest operators, through a statement from the Sports Betting Alliance (SBA). But what about the smaller, lower-hold operators in the state?
One of those is Circa Sports, which puts up smaller numbers compared to bigger names like SBA members FanDuel, DraftKings, BetMGM and Fanatics.
Circa CEO Derek Stevens joined Vegas Stats & Information Network’s (VSiN) “Follow the Money” show on Tuesday, where he was asked about how the latest taxation change in Illinois will affect his company.
At least for a moment, Stevens did not hold back.
“It’s not a good, logical, well-thought-out design, what Illinois did,” he said, before checking himself. “I’ve got to be careful, because it’s a privileged license, so I’m going to have to just back down on that.”
‘No reason’ to take small-stake bets anymore
As for how operators may look to mitigate the unprecedented taxation scheme, Stevens suggested that once the change comes into effect on July 1, some books may have to consider implementing a minimum wager amount to withstand the new cost.
“You can kiss those $1, $2, $5, $10 bets [goodbye]. That’s going to be the good old days,” Stevens said.
“Effectively, what it means is you’re gonna have to raise minimums, particularly for low-hold operators. If we try to hold 3%, by the time we’ve got to pay the federal excise tax and then we have to pay a fee to be an authorized gaming operator with MLB and others, then you throw this tax on, you know, there’s nothing there. There’s no reason to take a bet less than 10 bucks.”
Stevens suggested that the only way operators can protect their bottom line now that they’re paying 25 cents (or 50 cents, above a certain bet volume) on every wager taken is to prioritize “these massive-hold, same-game parlays.”
Change renders Circa’s model ineffective
Circa launched mobile betting in the Land of Lincoln in 2023. When it began taking online bets in the state, the tax rate was a flat 15% of gross revenue. Now, operators are taxed on their revenue on a sliding scale and will soon also pay a fee per wager.
If Stevens was bringing Circa into the Illinois market for the first time under the new regime, what would he do differently?
“I would look to enter the state with a model that may be a little bit different, like a 12 or 14% hold model,” he suggested. “I don’t think a low-hold model that Circa would have would make sense under that environment.”
Ultimately, he voiced the concern that smaller operators like Circa may be pushed out of the market as they may struggle to compete for even their slim slice of market share.
“Effectively, the only ones that can really compete in Illinois are the illegal bookmakers, offshores and illegals,” he opined. “It’s not logical. This is not well thought-out.”
SBA calls new per-bet fee ‘crippling’
Stevens’ comments are the first directly from the mouth of a sportsbook executive, but the SBA wasted no time issuing criticism about the state’s decision.
“For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million-plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market,” wrote the alliance in a statement.
“Make no mistake, this discriminatory, punitive and constitutionally suspect tax increase on legal sportsbooks who have invested more than a billion dollars in the state will be destabilizing for regulated sports betting in Illinois … With this change, lawmakers are essentially urging customers — and especially these small dollar bettors — to switch to unsafe and unregulated sportsbooks.”
The SBA mounted a last-minute campaign to urge Illinois bettors to contact state lawmakers. While it produced more than 76,000 emails and social media posts, it did not stop the measure from going through.
