Chicago Online Sportsbooks Will Stay Live Into 2026 As Court Fight Over City Tax Continues

Bettors in Chicago don’t have to worry about sportsbooks going dark as 2026 gets underway, after the city’s last-minute decision to issue licenses to major sportsbook operators before the new year removed the risk of an immediate shutdown.

The licences were issued following the Sports Betting Alliance (SBA) warning that operators could be forced offline if they weren’t in place by January 1, prompting the group to seek, and later withdraw, a bid for a temporary restraining order in Cook County Circuit Court. 

The move ensures Chicago bettors will continue to have access to legal sportsbooks even as the SBA’s high-stakes legal challenge to the city’s new betting tax moves forward in court.

In a statement posted on X, announcing it was dropping the motion for a temporary restraining order, SBA said, “Our complaint related to the constitutionality of Chicago’s proposed tax will continue to proceed on the merits in court.” 

While the SBA acknowledged that the city’s action eliminated the need for an expedited court order, the group made clear that its case contesting the constitutionality of Chicago’s proposed tax is still active.

Sports Betting Alliance Lawsuit Still Challenges Chicago’s Authority

The SBA, which represents FanDuel, DraftKings, BetMGM, Fanatics Betting and Gaming, and bet365, is moving forward with its lawsuit against Chicago, arguing that the city doesn’t have the authority under Illinois law to impose its own sports betting tax and licensing requirements. 

In the complaint, the SBA argues that “the Chicago Ordinance Amendments,” which created a new city-level tax and licensing regime for online sports betting, “exceed the City of Chicago’s constitutional authority.” 

The lawsuit points to Article VII, Section 6(e) of the Illinois Constitution, which bars home rule units from requiring a “license for revenue” or imposing taxes “upon or measured by” income without express authorization from the General Assembly. The SBA maintains that “the Illinois General Assembly has never granted the City the power to license online sports wagering for revenue.”

The complaint doesn’t end with the constitutional question; it also takes issue with the way Chicago has interpreted its own municipal code. In the lawsuit, the SBA argues that the ordinance amendments the city recently adopted apply only to operators with a physical presence in Chicago, but says city officials have nonetheless sought to require additional licenses from state-licensed sportsbooks that operate entirely online. The SBA calls that interpretation “untenable and at odds with the plain language of the ordinance.”

While the request for a temporary restraining order has been withdrawn, the SBA is asking the court to permanently block enforcement of Chicago’s ordinance and declare the city’s new licensing requirement and 10.25% tax unconstitutional.

State-Regulated Betting, City-Level Taxes, And The Industry-Wide Impact

A fundamental regulatory question lies at the heart of this dispute: can Chicago impose its own licensing and tax requirements on an industry already regulated at the state level? The answer carries real financial consequences for sportsbook operators, as Chicago seeks to impose new taxes and licensing fees on online sports betting revenue that is already subject to state regulation.

Under the city’s 2026 budget, Chicago plans to impose a 10.25% tax on adjusted gross receipts from sports bets placed within city limits, along with annual licensing fees ranging from $5,000 to $50,000. Sportsbook operators already face some of the highest state-level tax rates in the country, along with per-wager fees that increase once betting volume passes certain thresholds. 

In the filing, the SBA says its member operators, including FanDuel, DraftKings, BetMGM, Fanatics Betting and Gaming, and bet365, already face significant tax burdens. “These Illinois sportsbook operators already pay effective tax rates that can exceed 50% of their online sports wagering income in Illinois—one of the highest tax burdens on legal sports wagering in the country.”

The SBA has warned that Chicago’s tax and licensing structure could complicate regulation for licensed operators and disrupt the legal market. “The idea that we can flip a switch, create an entirely new, duplicative regulatory structure as well as an additional tax layer, without communicating directly to regulated and licensed companies what additional regulations and licensure would be required is, unfortunately, just not suitable and not doable within the time frames that are being proposed,” SBA president Joe Maloney told NBC Chicago. 

While all of this plays out in the courts, Chicago bettors won’t have to deal with any disruptions when they visit online sportsbooks. However, the outcome of the lawsuit could determine whether cities throughout Illinois will be able to assert control over an industry that has, until now, been exclusively regulated at the state level.