Facing a year-end deadline, the City of Chicago was able to get a budget passed that included some “alternative” revenue methods. In an effort to raise revenue, the City budget included new dollars from sports gambling.
Chicago adopted a new municipal licensing requirement and a 10.25% tax on certain sports wagering revenue as part of its year-end 2025 budget. The measure took effect January 1, 2026. Within days, a trade association representing major online sportsbook operators filed suit in the Chancery Division of the Circuit Court of Cook County. The case is Sports Betting Alliance v. City of Chicago, No. 2025 CH 12984, before Judge Cecilia Horan (because Count One alleges lack of authorization, perhaps this case will stay in the Chancery Section instead of being transferred to the Law Division, Tax & Misc. Remedies Section; see GAO 1.2,2.1(a)(3)(viii)).
In 2019, Illinois legalized sports wagering through the Sports Wagering Act, which created a comprehensive, state-controlled licensing and tax system overseen by the Illinois Gaming Board. Operators pay substantial state licensing fees and a graduated state tax on adjusted gross sports wagering receipts, with rates reaching 40%, plus a statutorily created 2% add-on for wagers placed in Cook County that is imposed and collected by the State.
Chicago’s December 20, 2025 ordinance amendments add a separate municipal layer. The amended code makes it unlawful for certain persons, including online sports wagering operators, to conduct sports wagering at a physical location in Chicago, including related mobile wagering conducted “as a result of being physically located in the City, unless they hold required state licenses and new City licenses.
The ordinance establishes “primary” and “secondary” sports licenses and sets significant fees for each. It also imposes a 10.25% City tax on the adjusted gross sports wagering receipts of primary sports licensees from wagers placed within the City, including wagers placed over the internet or mobile application and verified as placed in Chicago.
The Sports Betting Alliance, whose members include major online sportsbook brands operating in Illinois, challenges both the City’s interpretation of the ordinance and its constitutionality. The complaint seeks declaratory judgments and permanent injunctive relief.
The interpretive dispute is straightforward. The plaintiffs argue that, under the ordinance’s plain language, a City license is required only if an operator conducts wagering at a physical location in Chicago and engages in related mobile wagering tied to that physical presence.
They allege that most of their members have no physical location in Chicago and that even the one member with a retail sportsbook in the City conducts its online wagering through a separate affiliate not tied to that physical site. On that reading, the municipal license requirement, and therefore the 10.25% tax imposed only on “primary sports licensees,” would not apply to purely online operations without a qualifying physical presence.
The constitutional challenge goes further. Article VII, section 6(e) of the Illinois Constitution provides that a home rule unit may exercise the power “to license for revenue” or to impose taxes “upon or measured by income or earnings” only if the General Assembly has provided that power by law. The complaint alleges that the City’s new sports wagering license is a revenue license and that the 10.25% tax on adjusted gross sports wagering receipts is a tax measured by income or earnings. 2025CH12984 (2) It further alleges that the General Assembly has not authorized municipalities to impose their own licensing and income-based taxes on online sports wagering, particularly in light of the detailed state scheme.
Injunction, Resolution, and Withdrawal of TRO Motion
Procedurally, the case moved quickly at the outset. As the January 1 effective date approached, the plaintiffs sought a temporary restraining order to prevent enforcement of the licensing requirement. Before the scheduled emergency hearing on December 31, 2025, the City issued municipal licenses to the five SBA members. The plaintiffs then withdrew their TRO motion without prejudice, stating that the issuance of licenses mooted the need for immediate emergency relief while reserving all rights.
Amended Complaint Filed and Case Set for Status Next Month
On January 26, 2026, the plaintiffs filed a First Amended Verified Complaint maintaining their declaratory and constitutional claims and seeking permanent injunctions barring enforcement of the license and tax provisions. The case is currently set for status on March 3, 2026.
Key Takeaways
For local officials, the litigation is not really about sports betting. It is about how far home rule power extends when a municipality enters a field already governed by a detailed state licensing and tax regime. Illinois grants broad home rule authority, but Article VII, section 6(e) withholds two powers absent express legislative authorization: the power to license for revenue and the power to impose taxes upon or measured by income or earnings. When a city layers a new license and a gross-receipts tax on top of a comprehensive state framework, a court will look past labels and ask what the measure does in substance. That inquiry will not be limited to gaming.
For regulated businesses and associations, the case surfaces two recurring questions. First, is the municipal “license” meaningfully regulatory, or is it principally a revenue device? Courts examine whether the ordinance adds genuine regulatory standards, enforcement mechanisms, or public-safety objectives, or whether it primarily generates revenue. Second, when a municipality taxes adjusted gross receipts or a similar base, is that tax functionally measured by income or earnings? In heavily regulated industries, those questions arise whenever a home rule unit attempts to create a parallel local revenue stream.
For trade associations in particular, the procedural history is instructive. The plaintiffs moved quickly at the end of the year, sought emergency relief, and created enough litigation risk that the City issued licenses before the temporary restraining order hearing occurred. That did not resolve the merits, but it avoided immediate operational disruption and reframed the dispute from crisis management to a constitutional challenge on a more stable footing. Effective advocacy at the local level often turns on that kind of posture: monitoring late-stage budget amendments, engaging early with decision-makers, building a factual record on compliance burdens and regulatory overlap, and being prepared to seek prompt judicial review when necessary.
Further Reading