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The Sports Betting Alliance (SBA) is suing the City of Chicago over a new sports betting tax and licensing plan which 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 lawsuitfiled in Cook County Circuit Court, seeks to stop the city from implementing an ordinance that would slap a 10.25% tax on online sports betting and require operators to obtain 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.
In its complaint, the SBA says the city has no real legal authority to impose a tax like this.
“The City of Chicago’s interpretation of its amendments… would impose new municipal licensing requirements and a 10.25% tax on all online sports betting in the City,” the lawsuit states. The group argued that the measures were unconstitutional because “The Illinois General Assembly has never authorized the City to impose licensing fees or revenue-based taxes on online sports betting.”
The lawsuit also argues that the ordinance violates the Illinois Constitution, which limits cities from taxing income or charging income-based licenses unless the state 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 by revenue” without legislative approval.
Chicago is proposing major sports betting tax increases in its $16.6 billion budget
Under the approved budget, the new tax would apply to online and mobile verified bets placed within Chicago. City estimates cited in our earlier report suggest the tax could bring in at least $26 million annually, helping to support the city’s overall $16.6 billion spending plan.
The Sports Betting Alliance also pushed back against the city’s plan to require operators to obtain municipal licenses, arguing that Chicago has never put a workable licensing system in place. The complaint alleges that the city “is unable to timely implement the licensing scheme it claims is required by the Ordinance,” leaving operators with no clear path to compliance.
The lawsuit warned that enforcement of the ordinance could force sportsbooks to stop operating in Chicago or pass additional costs on to customers. “Discontinuation of operations in Chicago would likely cause irreparable harm,” the complaint said, adding that customers could be driven to illegal gambling alternatives.
The industry says Chicago’s tax hike risks hurting bettors
Industry representatives also spoke out against the proposal, saying the tax could harm the regulated sports betting market and ultimately reduce overall revenue instead of increasing it. The Sports Betting Alliance previously said the plan risks “damaging a legal market that protects bettors.”
The lawsuit asks the court to rule that the tax and licensing rules are unconstitutional and prevent the city from enforcing them. A hearing is scheduled for March 2026.
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The post The Sports Betting Alliance is suing Chicago over its new tax and licensing plan first appeared in ReadWrite.
