Chicago Avoids Sports Betting Shutdown, But SBA Lawsuit Moves On

• Chicago issued new “City licenses” to sports betting operators on Wednesday, Dec. 31, avoiding a sports betting shutdown
• The Sports Betting Alliance will no longer pursue a temporary restraining order against the city
• The alliance’s lawsuit against the city will continue, however

---

The sports betting show in Chicago will roll on.

Chicago avoided a potential sports betting shutdown on Thursday, Jan. 1, after issuing new “City licenses” to sports betting operators on Wednesday, Dec. 31. Operators threatened to go dark in the city in the new year due to confusion over licensing requirement’s in the city’s new 2026 budget.

The Sports Betting Alliance (SBA) announced it is no longer necessary to pursue its temporary restraining order against the city, but will move on with a recently filed lawsuit to declare Chicago’s new tax on online sports betting as invalid and unconstitutional.

Chicago Sports Betting Questions in 2026

Despite the newly issued licenses, the SBA said its lawsuit will continue as Chicago’s new sports betting tax went into effect on Jan. 1.

“We’re pleased to see the city moved quickly yesterday to maintain the operations of legal platforms that provide customer protections not available in the illegal market. Given these developments, there was no longer any need for an expedited TRO. The SBA will nevertheless continue to pursue in court resolution of the invalidity and unconstitutionality of the City’s recently passed license and tax ordinances. Chicago sports fans will continue to have the benefits of legal, regulated sports wagering without interruption heading into the new year,” a Sports Betting Alliance spokesperson said.

The SBA – which represents the interests of DraftKings, FanDuel, bet365, BetMGM, and Fanatics Sportsbook – contends in its lawsuit it is unconstitutional for the city to require new licenses 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.

Potential Irreparable Harm for Operators

In its lawsuit, the SBA notes that the 10.25% gross gaming revenue tax will “harm SBA members by costing them untold millions of dollars in lost revenues, and likely harming their reputations and impairing customer goodwill.”

The SBA contests the Illinois General Assembly has never granted Chicago the power to tax sports wagering income or revenue. The Sports Wagering Act and the Illinois Gambling Act are the state statutes that address licensing, regulation, and taxation of online sports betting revenues, but neither allows any county or municipality the power to impose its own local licensing requirements or taxes of its own, the SBA notes.

Several members of the Illinois legislature also agree with this assessment. In October, Rep. Daniel Didech (D-59) introduced HB 4171, a bill to prohibit anyone but state legislators the power to regulate, license, or tax sports betting in Illinois.

The proposed legislation came in direct response to Chicago’s new sports betting tax.

Didech’s bill aims to affirm that regulation of the Illinois sports betting industry remains the sole responsibility of the state. Didech is the Chair of the House Gaming Committee.

“When the legislature legalized sports betting in 2019, it was never our intent to allow local governments to create their own rules for this industry,” Didech said. “Chicago’s proposal will hurt consumers, drive vulnerable people to predatory illegal markets, and reduce state tax revenue. The city should work collaboratively with the state to ensure sound, informed policy decisions are made on this issue.”

His bill is co-sponsored by Reps. Curtis J. Tarver II (D-25), Angelica Guerrero-Cuellar (D-22), Edgar González, Jr. (D-23), and Michael J. Kelly (D-15). The state’s legislative session concluded earlier this year and Didech’s bill will not be able to be heard until the 2026 session opens in January.