Sports Betting Alliance sues Chicago over new tax and licensing plan
The Sports Betting Alliance (SBA) is suing the City of Chicago over a new sports betting tax and licensing plan that was approved as part of the city’s $16.6 billion budget. According to court filings and budget documents, the group is pushing back against what it says is an unfair new framework for sportsbooks.
The lawsuit, filed in Cook County Circuit Court, aims to stop the city from enforcing an ordinance that would slap a 10.25% tax on online sports betting and require operators to get city licenses starting in 2026. The changes were bundled into Chicago’s latest budget package as a way to help close a major funding shortfall.
https://twitter.com/DustinGouker/status/2006093780898963737/
In its complaint, the SBA says the city doesn’t actually have the legal authority to impose a tax like this.
“The City of Chicago’s interpretation of its amendments… would impose a new municipal licensing requirement and a 10.25% tax on all online sports wagering in the City,” the lawsuit states. The group argues the measures are unconstitutional because “The Illinois General Assembly has never authorized the City to impose licensing fees or income-based taxes on online sports wagering.”
The case also argues that the ordinance violates the Illinois Constitution, which limits cities from taxing income or charging revenue-based licenses unless the state specifically allows it. According to the complaint, the city’s actions “exceed the City of Chicago’s constitutional authority” and amount to a tax “measured by income” without legislative approval.
Chicago proposes major sports betting tax hike in $16.6 billion budget
Under the approved budget, the new tax would apply to online and mobile bets that are verified as being placed within Chicago. City estimates cited in our earlier report suggest the tax could bring in at least $26 million a year, helping support the city’s overall $16.6 billion spending plan.
The Sports Betting Alliance is also pushing back on the city’s plan to require operators to get municipal licenses, arguing that Chicago hasn’t actually put a workable licensing system in place. The complaint states that the city “has been incapable of timely implementing the licensing scheme it now claims the Ordinance requires,” leaving operators without a clear path to compliance.
The lawsuit warns that enforcing the ordinance could force sportsbooks to stop operating in Chicago or pass the added costs on to customers. “Ceasing operations in Chicago would likely cause irreparable injury,” the complaint states, adding that customers could be driven toward illegal gambling alternatives.
Industry says tax hike in Chicago risks harming bettors
Industry representatives have also spoken out against the proposal, saying the tax could hurt the regulated sports betting market and end up reducing overall revenue instead of boosting it. The Sports Betting Alliance previously said the plan risks “undermining a legal market that protects bettors.”
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The case asks the court to rule that the tax and licensing rules are unconstitutional and to stop the city from enforcing them. A hearing is scheduled for March 2026.
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