According to a recent report, Illinois experienced a 4.8% increase in state tax revenue compared to the previous fiscal year, reaching $1.99 billion in FY23. This growth reflects Illinois’s robust gaming industry, which encompasses casino gaming, video gaming (slot routes), sports betting, horse racing, and the lottery.
The report not only reviews the last fiscal year’s performance but also considers financial data stretching back to when each gambling category was legalized. The commission highlighted that FY24’s revenue surge was driven primarily by the steady expansion of video gaming, strong lottery sales, and the rapid rise of sports wagering. The lottery and slot routes were the largest contributors, generating $886 million and $848 million in tax revenues, respectively. Sports betting and horse racing contributed $190 million and $6 million, correspondingly.
Casinos generated $158 million, showing only a minor increase from FY23’s $157 million. Despite the opening of two new casinos, their impact on tax revenues has been minimal due to factors such as a reduced tax structure, issued credits, and higher administrative costs.
### Slot Routes Gaining Traction
The most noteworthy trend within the industry is the rise of slot routes. Although legalized in 2009, operations didn’t commence until September 2012. Back then, 61 video gaming terminals were online statewide; by June, the number had surged to 48,176. In FY14, tax revenue from slot routes was $145.6 million, but by FY24, it had increased to $997 million. Starting in FY25, the tax on net terminal income (NTI) will climb from 34% to 35%, which, combined with the growing number of terminals, is expected to further boost tax revenue.
This trend poses a challenge for the state’s casino industry, which hasn’t experienced comparable growth since slot routes were legalized. During the Covid pandemic, this shift became particularly evident. The report states that in FY21, adjusted gross receipts (AGR) for state casinos fell by 4.8%, while NTI from slot routes rose by 30.8%.
“It seems Illinois gamblers favored the convenience and lesser crowds of video gaming parlors over larger, more public casinos,” the report suggests. These parlors are often perceived as a “safer” gambling choice, contributing to their growing popularity.
### Future Expansion of Illinois Casinos
Illinois legalized riverboat gambling over 30 years ago, with the first boat setting sail in September 1991. The sector has fluctuated over the years, with casinos leading gaming tax revenue for a period between FY2003 and FY2007, a status they haven’t regained since.
A 2019 legislative change introduced six new casino and three ‘racino’ licenses, including a highly anticipated Chicago casino currently being developed by Bally’s. This multibillion-dollar project is projected to open in September 2026, although a temporary location started operations in September 2023. Furthermore, existing casinos were permitted to increase their machine capacity from 1,200 to 2,000.
In FY24, Illinois casinos’ total AGR reached $1.61 billion, marking a 13.2% year-over-year increase and the highest figure since FY12. However, the report warns that increased competition and market cannibalization from new licenses may hinder future AGR growth.
“Most casinos recorded flat or slightly declined AGR totals compared to FY2023,” the report noted. For example, Rivers Casino in Des Plaines, the largest AGR generator, saw a decrease from $557.6 million in FY2023 to $526.7 million in FY2024.
Among the 15 operating casinos in Illinois, 10 qualified for 10-year AGR comparison analyses. Nine have reported AGR decreases of at least 18% within that timeframe, with Rivers being the sole exception.
### Changes in Sports Betting Taxation
FY24 marked the fifth fiscal year of legalized sports betting in Illinois, despite pandemic-related disruptions in FY20. Since then, the sector has experienced considerable annual growth, with 13 licenses now in play.
Sports betting AGR for FY24 hit $1.1 billion, surpassing the $1 billion mark for the first time. Concurrently, state tax revenue grew to $166 million, with both AGR and taxes rising by 16%. Additionally, licensing fees contributed an extra $30.1 million, some of which will only be accounted for in FY25.
The report forecasts “moderate” growth in sports betting, driven by the ongoing rise of online betting and sustained investment in advertising. Three available stand-alone master licenses, untethered to land-based casinos, come with a licensing fee of $20 million each.
A key factor going forward is Illinois’s new tiered tax structure, implemented in July. FY24’s remarkable figures were achieved under the previous flat rate of 15% of AGR. The revised system introduces a graduated tax rate ranging from 20% to 40%, depending on AGR levels. Inspired by this increase, DraftKings even briefly suggested a surcharge on winning bets to counterbalance the higher tax burden in August. Nonetheless, the report assures this won’t impede sports betting growth.
“There is a risk that the elevated tax burden could reduce advertising budgets for sportsbooks, potentially lowering overall sports wagering AGR,” the report stated. “However, given the continuous revenue growth since sports wagering’s inauguration in Illinois and the addition of new sportsbooks, we anticipate that sports wagering will continue expanding despite the higher tax framework.”
