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Rolling the dice: How sports betting tax revenue is impacting states across the US

·Mike Taylor

Photo Illustration by Elizabeth Ciano // Stacker // Shutterstock
Photo Illustration by Elizabeth Ciano // Stacker // Shutterstock
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The American sports betting boom is a freight train hurtling down the track. Despite increasing calls for regulation, there's no sign it will slow down as states in on the action continue raking in absurd sums. With climbing revenue, tax revenues climb too.

According to the American Gaming Association, in the first quarter of 2024, gamblers wagered a record $36.86 billion on sports, creating $3.33 billion in revenue—and $804.5 million in tax revenue. Sports betting behemoth New York tops the list; in the first three months of the year, it took in nearly five times as much revenue as Pennsylvania, trailing at #2. The Empire State also has the third-highest percentage of sports betting tax revenue to overall tax revenue at 0.7%. That's thanks mostly to its 51% tax rate on online sports wagering, which matches New Hampshire's for the highest in the country.

Other states are considering increasing their tax rates in response to this and similar success stories. Ohio, for example, doubled its levy to 20%, and New Jersey and Illinois are considering raising theirs from 13% and 15% to 30% and 35%, respectively.

It may be a race for the money, but not all locales thrive. When another state grabs a fork to take a bite of the pie, neighboring markets can be left wanting. These newcomers—including the previously untapped Maryland and Massachusetts—have pushed away Delaware, Maine, and Rhode Island from the table.

Maine has another problem, though some might call it a feature: It's offering perhaps the most regulated market in the nation. Advertising with celebrities, professional athletes, or Olympic athletes is prohibited, and there are many other restrictions, including those designed to limit exposure to young people. Two sportsbooks offer online sports betting in the state, but there has been no in-person wagering.

Books, of course, want to make as much money as possible. When presented with unfavorable conditions, such as high tax rates or tight regulations, they say they will pass on the cost to customers by making odds longer or rescinding promotions.

To see how these different scenarios are playing out across the country, ATS.io mapped sports betting tax revenue using data from the Census Bureau.

Heat map showing sports betting tax revenue per capita across the United States in Q1 2024.

ATS.io

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Sports betting taxes in the US states grew nearly 30% from Q1 2023

In the first quarter of 2023, U.S. sports betting tax revenue was $619 million, or 0.18% of the country's total tax revenue. The former figure jumped 30% in 2024—even without much input from the three most populous states: California, Texas, and Florida. The first two are among the states in which parimutuel, or pool, betting is legal but sports betting has not been fully sanctioned.

The windfall, however great, still accounts for just 0.23% of tax revenue across the U.S. Only in Montana does sports betting tax revenue surpass 1% of tax revenue. Even so, states can do novel things with the supplementary money. Colorado, for instance, is funding water conservation efforts, taking profits from a vice industry, and putting them in the pocket of an underfinanced sector in an increasingly dry West. This gambit has some legislators thinking twice, though. "How do I justify in my mind benefiting society from somebody else's guilty pleasures that have the potential to impact their lives permanently?" state Sen. Cleave Simpson, the co-sponsor of a bill that would uncap this revenue stream, told the Post.

Sure, the rise of sports betting in the U.S. was predictable, but lawmakers seemingly saw dollar signs instead of an accompanying increase in problem gamblers. The issue and its highest-profile victims have made headlines worldwide, partly because sports leagues were eager to cozy up to sportsbooks to get a cut.

One scandal haunted perhaps the best player in Major League Baseball, Shohei Ohtani, ahead of this season. He was cleared of wrongdoing, but his interpreter and friend, Ippei Mizuhara, was charged with bank and tax fraud and could spend 33 years in federal prison after stealing nearly $17 million from the two-way superstar to help pay off $40.7 million in gambling debts. The situation outlines the risks involved with legalized sports gambling, the foremost of which is addiction. One poll showed nearly half (45%) of people ages 18 to 34 have bet more than they should with an online sportsbook.

So even if sports betting tax revenues account for minuscule percentages of state budgets, sportsbooks are supercharging economies while fueling unhealthy appetites in problem gamblers. Advocates are calling on governments and industry leaders to address a gambling issue that is putting millions of people in danger while undermining sports betting's growth trajectory. That could mean moving more of that revenue—the standard is 1%—into addiction services.

Story editing by Carren Jao. Additional editing by Kelly Glass. Copy editing by Paris Close.

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