Could high tax rates soon be holding online betting back?
Online betting is gaining popularity all across the United States and more broadly throughout the world as regulators increasingly open up to the practice, but could high tax rates be holding back its growth, particularly in some US states?
More and more states in the United States want to legalize online betting because of the potential revenue stream that can result from the practice and bring benefits to local economies. The state of New Jersey recently shattered records with massive growth and profits in the gambling sector, especially in the online industry.
Despite this, some states still want to impose heavy taxes on online betting. One such example is the state of Illinois, which has recently increased taxes as critics of the move claim it will curb the growth of online betting and lessen economic benefits to the state.
Decline in online betting follows Illinois tax increase
Illinois’s betting industry experienced a dramatic effect in online betting following the state’s newly implemented per-wager tax rates. The Illinois Gaming Board’s data highlighted that five million fewer bets were placed in September 2025 compared to the same month in 2024, a 15% decrease in the total number of wagers made year-over-year. This is a significant drop, likely caused by the increased tax, and not a momentary shift in player dynamics.
Online betting could be limited if high tax rates continue to be imposed.
Illinois charges operators 25 cents per online or mobile bet for the first 20 million wagers, and an even steeper amount of 50 cents on every such bet after exceeding that 20-million bet threshold. This charge is in addition to the existing tax on sportsbook revenues, which can climb all the way up to 40% depending on the specific therein. The new charge only applies to online and mobile wagers, and in-person bets are exempt.
Some online betting sites and platforms operating in the region have chose to pass these new costs onto customers by charging a surcharge per bet. Other platforms have increased the minimum wager sizes to balance out the new costs they’re incurring. This is likely why the number of online bets made has decreased, as the cost is ultimately shouldered by the players themselves.
Ironically, while the number of bets has dropped drastically, the amount of money wagered has actually increased. The tier-one total rose from $416.8 million to $434.5 million, and the tier-two total increased from $676.7 million to $782.3 million. These increases may seem positive, and they reflect the economic windfalls that states are experiencing through opening up regulations on online betting, but fewer players and fewer bets being made is still ultimately limiting what the state is able to do.
Illinois collected $10.5 million from the new per-wager taxes in September, but the Sports Betting Alliance has warned the state of risks imposed by the new charge even as it brings this money in. The SBA says players may be enticed by illegal alternatives, which are cheaper compared to the state-licensed operators, causing the state to miss out entirely on local and legal revenue sources while filtering more players to less reputable betting avenues.
Feature image credit: Canva
Khizar Mundia has been playing video games for as long as he can recall. Things have come a long way since the many days he spent playing the original NES, though. He now covers a variety of competitive games and esports, as well as the world of streaming, ranging from Twitch to Kick. If it’s of interest to gamers, it’s of interest to Khizar.
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