The fight between Sports Betting Alliance (SBA) members and the city of Chicago is heating up and headed to a Cook County courtroom.
SBA members bet365, BetMGM, DraftKings, Fanatics and FanDuel have collectively filed suit against the city, the Chicago Department of Finance, City Comptroller Michael Belsky and Commissioner of Department of Business Affairs and Consumer Protection Ivan Capifali for the new tax and licensing scheme the city intends to impose on Jan. 1.
Chicago plans on 10.25% local betting tax
As part of the new city budget, Chicago plans to impose a 10.25% tax on all wagers, retail and online, placed by people within the city. Additionally, operators offering online wagers in the Windy City will be expected to obtain new city-specific licenses. The master license cost $50,000 up front with a $25,000 annual renewal fee, while platform providers will pay an additional $10,000 up front with a $5,000 renewal fee.
The suit argues that the Chicago City Council does not have the legal power to impose the new scheme, as the General Assembly hasn’t granted it to them. The filing referenced state law stipulating a “home rule unit” (a city or municipality) cannot require a license for revenue or tax groups based on income, earnings or occupations without legislative permission.
SBA previously released an open letter to Chicago Mayor Brandon Johnson expressing concern about the license mandate, as the budget did not explain how to obtain such a license yet operators were expected to obtain one by the start of the year.
Dec. 29 and sportsbooks still lack city licenses
When the sportsbooks were told by the city they would have licenses issued by Dec. 29 and none arrived, the groups took the city to court.
The SBA is asking the court to find the new sports betting tax illegal and is seeking a temporary restraining order delaying the enforcement of the new tax and licensing scheme while the case proceeds.
The group’s objections extend far beyond the ambiguity around the city license, which requires no additional or bespoke regulations beyond what online sportsbook licensees are required to do by the Illinois Gaming Board (IGB).
The sportsbooks also argued that their interpretation of the new rules is that they do not apply to any of their online wagering, as it specifically refers to business related to a physical sportsbook in the city but does not explicitly mention online activity. The suit points out that even the lone operator with a brick-and-mortar location in the city, DraftKings, was offering online wagering competely unrelated to its venue at Wrigley Field for years before the location even opened. In other words, there are no sportsbooks in Illinois conducting online wagering connected to a physical Chicago sportsbook at all.
The city made it clear it does not agree with that interpretation of the law and intends to start collecting taxes on wagers from Chicago residents in a matter of days.
SBA members worry they might do dark throughout Illinois
The SBA has previously threatened that members will leave Chicago if there is no clarity, but in the suit it also suggested they might all go dark in the entire state in the new year, as it does not want to risk its Illinois license by not offering its product statewide per IGB regulations. Moreover, the operators alleged they cannot risk operating out of compliance in Illinois without potentially risking sportsbook licenses in other states that monitor all regulated markets for compliance.
Finally, the suit reiterated that the existing law does not allow for Chicago to impose such a tax. In addition to lacking permission from the legislature, the SBA pointed out the existing 2% tax on retail wagers in Cook County makes it crystal clear that it is the state, not municipalities, which determines taxation schemes on sports betting.
“Simply put, the 2% Cook-County-specific tax, was statutorily created by the State, is collected by the State, and is paid by the State to Cook County. This demonstrates a clear statutory framework whereby Illinois decides how much sports wagering is taxed state-wide and in any home-rule units such as Cook County or Chicago,” the brief argued.
The SBA said the city has not guaranteed operators will have city licenses by the start of the year, which is something the group has previously suggested could force them offline just in time for the NFL postseason and the College Football Playoffs.
