A fierce legal battle has erupted between the Sports Betting Alliance and the City of Chicago, ignited by a newly approved $16.6 billion budget. At the heart of the conflict lies a controversial plan to impose a significant tax and licensing structure on sportsbooks operating within the city limits.
The Sports Betting Alliance has filed a lawsuit in Cook County Circuit Court, seeking to halt the implementation of an ordinance that would levy a 10.25% tax on all online sports betting revenue generated within Chicago. Beginning in 2026, operators would also be required to obtain city-specific licenses, adding another layer of complexity and cost.
The core of the Alliance’s argument centers on the city’s legal authority. They contend that Chicago lacks the power to impose such a tax, asserting that the Illinois General Assembly has never granted permission for municipal licensing fees or income-based taxes on online sports wagering.
The lawsuit alleges a direct violation of the Illinois Constitution, which restricts cities from taxing income or implementing revenue-based licenses without explicit state authorization. The city’s actions, the complaint argues, represent a clear overreach of its constitutional boundaries, effectively creating an income tax without proper legislative backing.
City officials project the new tax could generate at least $26 million annually, a crucial component in balancing Chicago’s substantial $16.6 billion spending plan. This revenue is intended to address a significant funding shortfall, but the Alliance believes the cost will be far greater.
Beyond the tax itself, the Alliance is challenging the feasibility of the proposed licensing system. They claim the city has demonstrated an inability to establish a functional and timely licensing process, leaving operators in a state of uncertainty and potential non-compliance.
The lawsuit warns of potentially dire consequences if the ordinance is enforced. Sportsbooks may be forced to cease operations within Chicago altogether, or they may pass the increased costs directly onto consumers, making legal sports betting less attractive.
Industry experts fear that driving sportsbooks away could have a paradoxical effect, pushing bettors towards unregulated, illegal gambling platforms. This outcome would undermine the very protections the legal market is designed to provide.
The Alliance argues that the tax hike risks damaging the regulated sports betting market, potentially reducing overall revenue instead of increasing it. They maintain that a thriving legal market is essential for safeguarding bettors and ensuring responsible gambling practices.
The case now rests with the court, which is asked to declare the tax and licensing rules unconstitutional and issue an injunction preventing their enforcement. A hearing is currently scheduled for March 2026, setting the stage for a pivotal legal showdown.
