Sports Betting Alliance Sues City of Chicago Over Licensing Requirements, New Taxes

• The Sports Betting Alliance today filed a lawsuit and requested a temporary restraining order against the City of Chicago
• The lawsuit seeks to declare Chicago’s new online sports betting tax and licensing requirements for operators invalid and unconstitutional
• The alliance believes the state has the sole authority to license and tax online sports betting in Illinois

The Sports Betting Alliance has filed a lawsuit and requested a temporary restraining order against the City of Chicago, seeking to declare the city’s new tax on online sports wagering and new municipal licensing requirements for operators invalid and unconstitutional.

The city’s new sports betting tax of 10.25% on gross gaming revenue and licensing structure, which requires operators to hold a new city license, goes into effect on Jan. 1, 2026. The Sports Betting Alliance contends in its lawsuit that despite every assurance from the city that new licenses would be issued on Monday, Dec. 29, none have been issued to its sports betting operators or to its master license holder.

The Sports Betting Alliance – which represents the interests of DraftKings, FanDuel, bet365, BetMGM, and Fanatics Sportsbook – claims that without licenses its members will be in jeopardy of violating the new Chicago ordinance as of Jan. 1, 2026, and may have to cease operations until new licenses are awarded.

Who Can Tax Sports Betting?

The Sports Betting Alliance filed the lawsuit in response to Chicago’s new $16.6 billion budget, which includes a new 10.25% tax on online sports betting gross gaming revenues for all licensed operators and new licensing requirements.

In addition to the new tax rate, the city’s budget also calls for a new licensing requirement that have sports betting operators scratching their heads.

According to an Sports Betting Alliance (SBA) letter sent to Mayor Johnson, Chicago’s proposed budget requires online sports betting operators to have a “City license” by Jan. 1, 2026, to do business, but has not yet provided the details on what is required to procure a license.

In its lawsuit, the Sports Betting Alliance contends it is unconstitutional for the city to license and tax online sports betting. The Illinois constitution, the lawsuit claims, reserves authority over licensing for revenue and income-based taxation to the state, unless expressly delegated.

“The Chicago Ordinance Amendments exceed the City of Chicago’s constitutional authority. Under Article VII, Section 6(e) of the Illinois Constitution, a home rule unit such as the City of Chicago, may not require a ‘license for revenue’ or ‘impose taxes upon or measured by’ income, earnings, or occupations unless the General Assembly has expressly granted that power to the home rule unit. The General Assembly has not done so here,” counsel for the alliance wrote in the lawsuit.

Both the lawsuit and temporary restraining order were filed in the chancery division of the Cook County Circuit Court, Illinois County Department.

Possible Jan. 1 Shutdown for SBA Operators

In order to avoid a Jan. 1 online sports betting shutdown for Sports Betting Alliance operators, the temporary restraining order seeks an injunction to prevent the new licensing requirements from going into effect this week.

The budget requires each operator to acquire a new “City License” to do business in Chicago. The city will charge an initial $50,000 fee for a primary sports license for one year, and a $25,000 fee for each year thereafter. The Sports Betting Alliance notes in its suit that these license fees “exceed those imposed on all other types of businesses.”

“By superimposing its own revenue-driven licensing requirement on top of that framework, the city exceeds its constitutional authority under Article VII, Section 6(e),” counsel wrote.

If granted an injunction by the court, the new licensing requirements will not go into effect on Jan. 1, 2026, and the operators will be able to continue business in the city.