Illinois Sports Betting Sees Handle Rise Despite Revenue Dip in August

Illinois sportsbooks experienced a significant increase in betting activity in August, with the Illinois Gaming Board (IGB) reporting a total handle nearing $878 million. This figure represented a 30% jump compared to the same month in 2023 and a 13.5% rise from July. Despite this boost, the state’s sportsbooks saw a 17% drop in adjusted gross revenue, finishing the month with approximately $59.2 million.

The completed events handle, which includes wagers placed on concluded sporting events, amounted to $865.2 million, with the difference likely reflecting futures bets for college and NFL football. Although Illinois enjoyed robust betting activity, it is expected to trail New York in of total handle for August, as Arizona has yet to publish its figures.

Revenue and Tax Implications

While August’s revenue was up 26.1% from the previous year, it was significantly lower than the $71.3 million generated in July, largely due to a lower hold rate. The state’s sportsbooks recorded a hold rate of 6.7%, down nearly 2.5 percentage points compared to July’s 9.2%. Despite the month-over-month drop in revenue, Illinois saw a relatively minor decrease of 4.3% in tax revenue, collecting $13.6 million.

The drop in taxes was mitigated by Illinois’ new progressive tax structure, which came into effect on July 1. The state replaced its previous 15% flat tax on adjusted gross revenue (AGR) with a sliding scale that starts at 20% and can rise as high as 40%, depending on revenue thresholds. This new system was designed to generate more revenue from operators earning higher AGR.

The progressive tax rates have been a source of concern for major operators, especially mobile betting giants FanDuel and DraftKings, which are the largest sportsbooks in Illinois. These two operators, consistently leading the market, are the most likely to face the highest tax brackets under the new system.

Initially, Governor JB Pritzker had proposed a straightforward increase in the tax rate from 15% to 35%. However, the current sliding scale structure was eventually approved after much debate. In response to the new tax environment, DraftKings CEO Jason Robins briefly floated the idea of adding a surcharge on winning bets to offset the increased tax burden in Illinois and three other states. This proposal was swiftly withdrawn after receiving widespread criticism, with no other operators showing .

Both FanDuel and DraftKings have already seen their tax obligations increase as a result of suring the $30 million revenue threshold, pushing them into the higher tax brackets. For example, FanDuel paid 25% on $20 million of its $21.6 million in revenue, while DraftKings, which led the market with $22.3 million in revenue, also moved into the 25% bracket.

Hard Rock’s Entry and Fanatics’ Ascendance

August also marked the debut of Hard Rock Bet as Illinois’ ninth mobile sportsbook, which came shortly after the opening of the Hard Rock Casino in Rockford. In its first six days, Hard Rock Bet generated a handle of $1.6 million, with bettors walking away $10,100 ahead.

Additionally, there was a notable shift in the rankings of established sportsbooks in Illinois. Fanatics Sportsbook surged to third place for handle, generating $62.7 million in wagers. This was its highest total since entering the Illinois market in April and marked the best performance by a sportsbook tied to Hawthorne Race Course since January 2023.

BetRivers, which had long been a leader in Illinois’ sports betting market, found itself in fourth place for handle but maintained a strong showing in revenue. The operator reported $4.4 million in revenue from $59.5 million in completed events wagering, putting it just behind FanDuel and DraftKings in of profitability.

FanDuel and DraftKings continued their dominance in Illinois, with DraftKings edging out its rival for the top spot in August. DraftKings reported a handle of $334.7 million, resulting in $22.7 million in adjusted revenue, while FanDuel posted $21.7 million in revenue from $267.3 million in wagers. Both operators faced the challenge of rising tax obligations as they moved into higher brackets under the state’s new tax structure.

BetRivers, although lagging in handle, managed to secure the third-highest revenue total for the month, with a 7.4% hold on its $59.5 million handle. Fanatics and BetMGM rounded out the top five for revenue, reporting $3.6 million and $2.1 million, respectively.

With the nationwide trend of increased sports betting activity in September and a year-over-year rise in handle likely to push revenues even higher, Illinois may see its top sportsbooks paying taxes at the highest 40% bracket by the end of the fiscal year. Both DraftKings and FanDuel are already nearing the $100 million revenue threshold, which would trigger an increase in their tax rates to 35%.

For now, Illinois continues to benefit from its growing sports betting market, with rising tax revenues helping offset the revenue declines experienced by operators. Despite the challenges posed by the new tax structure, the state’s sportsbooks are likely to see continued growth as the NFL season progresses.

Source:

”Illinois sports betting handle up in August, but hold declines sharply against July”, igamingbusiness.com, October 21, 2024.