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Key Takeaways

• DraftKings and other sports betting stocks fell Monday after Illinois lawmakers passed a new budget that included a tax on the industry.

• The new budget includes a 25 to 50 cent tax on every bet placed in the state.

• An industry group called the provision a "crippling tax" and said it would look to fight the measure.

Shares of several sports betting companies dropped Monday after lawmakers in Illinois passed a state budget that includes a new tax on the industry.

DraftKings (DKNG) stock was recently down more than 7%. Shares of FanDuel parent Flutter Entertainment (FLUT), MGM Resorts (MGM), and Rush Street Interactive (RSI), which operates BetRivers in Illinois and other states, also fell. The Roundhill Sports Betting & iGaming ETF (BETZ) fell nearly 2%.

The budget includes a new provision taxing every sports bet made in Illinois by 25 cents for the first 20 million wagers a company takes and 50 cents for each bet past that threshold. Illinois Governor J.B. Pritzker has said he plans to sign the budget into law.

Analysts Say DraftKings Would Have Faced $68M in Taxes Over Last Year

Citi analysts on Monday estimated that DraftKings would have been subject to roughly $68 million in additional taxes if the new tax had been in effect over the last 12 months. They said they expect betting companies like FanDuel and DraftKings, which they estimate are the only two over the 20 million bet limit, to reduce the amount of promotional events they run in the state to offset the cost.

The new tax comes after the state previously passed a progressive tax system of up to 40% in last year's budget, up from 15% previously.

"For the second consecutive year, the Illinois legislature chose to balance its budget with a crippling tax on legal online sports betting operators and their million plus Illinois customers — this time with no warning and no consideration of the devastating impact this tax would have on the legal market," the Sports Betting Alliance, which represents the gaming companies, said in a statement.

The group said it would "continue fighting this discriminatory tax."

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