DraftKings and FanDuel don't agree on much. They're cutthroat competitors who spend hundreds of millions trying to steal each other's customers.

But they agree on one thing: Chicago's new sports betting tax is garbage, and they're suing to stop it.

The Quick Hit

• What's happening: Sports Betting Alliance (DraftKings, FanDuel, BetMGM, bet365, Fanatics) is suing Chicago
• The issue: City's new 10.25% tax on wagers placed within city limits
• The money: Chicago budgeted $26 million from this tax in 2026
• The argument: Sportsbooks claim the tax exceeds Chicago's legal authority

The Details

Chicago's 2026 budget includes a fresh 10.25% levy on every wager placed within city limits. That includes online bets and retail sportsbooks.

The Sports Betting Alliance — which represents the industry's biggest players — filed suit claiming the plan violates the Illinois state constitution.

Their argument: Chicago can't impose taxes that the state hasn't explicitly authorized. Sports betting regulation flows from the state level, and Chicago is trying to carve out its own tax on top of what the state already collects.

The Numbers Game

Illinois sportsbooks generated over $1.1 billion in online revenue through October 2025. That's up from $951 million over the same period in 2024.

The state collected $365 million in taxes. Cook County got an additional $11.9 million.

Now Chicago wants its cut too. And the sportsbooks are saying "slow down."

Why This Matters

If Chicago wins, other cities will follow. New York City, LA, Houston — any major metro could slap additional taxes on betting revenue.

That means either:

1. Sportsbooks eat the cost and accept lower margins
2. They pass the cost to bettors through worse odds
3. They pull out of specific markets entirely

None of those options are good for degenerates.

The Industry's Position

The sportsbooks aren't just mad about the money. They're mad about the precedent.

State-level regulation provides consistency. If every city can layer on its own taxes and requirements, the business becomes a patchwork nightmare. Imagine having different rules (and different odds) depending on which side of a city border you're on.

The Alliance is seeking a temporary restraining order to block the tax while the case plays out. Whether they get it will set the tone for this entire fight.

Chicago's Counter

The city argues it has the authority to tax businesses operating within its borders. Sports betting is a lucrative industry making billions in their city — why shouldn't Chicago get a piece?

The $26 million in projected revenue isn't a rounding error. It's real money that funds city services.

The Prediction

This is going to court, and it's going to take time. The legal questions around municipal versus state authority aren't simple.

If the sportsbooks win, Chicago loses $26 million and other cities get a warning shot. If Chicago wins, expect similar taxes to pop up everywhere.

For bettors, the immediate impact is minimal. The tax is built into the business model, not tacked onto your winning bets. But long-term, more taxes mean worse odds and smaller promotions.

The Bottom Line

The industry that spent years fighting for legalization is now fighting against taxation. It's a predictable evolution — every legal market eventually becomes a tax target.

Whether DraftKings and FanDuel win this lawsuit matters. Not just for Chicago bettors, but for every bettor in every city that's watching to see if they can do the same thing.

Stay tuned. This one's headed to court.