Sports Betting Alliance sues Chicago over new tax and licensing plan

The Sports Betting Alliance (SBA) is suing the city of Chicago for new sports betting tax and licensing plan this was approved as part of the city’s $16.6 billion budget. According to court documents and budget documents, the group opposes what it sees as an unfair new framework for sports betting.

THE trialfiled in Cook County Circuit Court, seeks to prevent the city from enforcing an ordinance that would impose a 10.25 percent tax. tax on online sports betting and requiring operators to obtain municipal licenses starting in 2026. The changes were incorporated into Chicago’s latest budget package to help close a major funding gap.

In its complaint, the SBA asserts that the city does not actually have the legal authority to impose such a tax.

“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 betting in the City,” the lawsuit states. The group claims 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 betting.”

The case also argues that the ordinance violates the Illinois Constitution, which prohibits cities from taxing revenue or imposing licenses based on revenue unless the state specifically authorizes it. According to the complaint, the city’s actions “exceed the constitutional authority of the City of Chicago” and amount to a tax “measured against income” without legislative approval.

Chicago Proposes Major Sports Betting Tax Increase in $16.6 Billion Budget

Under the approved budget, the new tax would apply to online and mobile bets verified to have been placed in Chicago. City estimates cited in our previous report suggest the tax could raise at least $26 million annually, helping to support the city’s overall $16.6 billion spending plan.

The Sports Betting Alliance also opposes the city’s plan to require operators to obtain municipal licenses, arguing that Chicago does not actually have a viable licensing system in place. The complaint says the city “has been unable to timely implement the licensing system it now purports to require through the ordinance,” leaving operators without a clear path to compliance.

The lawsuit warns that enforcing the order could force sportsbooks to cease operations in Chicago or pass on additional costs to customers. “Ceasing operations in Chicago would likely cause irreparable harm,” the complaint states, adding that customers could be pushed toward illegal gambling alternatives.

Industry says Chicago tax hike risks hurting bettors

Industry representatives also spoke out against the proposal, saying the tax could harm the regulated sports betting market and end up reducing overall revenue instead of increasing it. The Sports Betting Alliance previously said the plan risked “undermining a legal market that protects punters”.

The case asks the court to declare the tax and licensing rules unconstitutional and prevent the city from enforcing them. A hearing is scheduled for March 2026.

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