Without federal laws for sports wagering, states are left to experiment and set their own tax-revenue structures. Some states tax sportsbooks as high as 50% and others as low as 6%, according to the American Action Forum.
States with authorized sports wagering tend to hover in the 10-15% range, with nuances added from there. Some states deduct promotional bets, while others require disclosure, per Bloomberg Tax.
OLBG compiled a list of the 10 states that collected the most tax revenue from commercial gambling during 2021 and how that revenue compares to 2020. Data comes from the American Gaming Association and various news media outlets, with the tax total reflecting specific state and local taxes applied directly to gaming revenue. Data does not include billions of dollars paid annually by the industry via income, sales, other corporate taxes, or payroll taxes paid by gaming operators and suppliers.
In seven of the 10 states featured on the forthcoming list, sports gambling is legal in some capacity. Every jurisdiction in the U.S. with commercial casino or sports betting operations reported an increase in gaming revenue between 2020 and 2021; 23 of 43 jurisdictions saw record annual commercial gaming revenue in 2021, according to the AGA.
The biggest gains in gaming revenue alone were documented in Tennessee and Michigan, each of which reported the first full year of sports betting revenue. Eight of the 10 states that gained the most tax revenue from commercial gambling overall in 2021 are located in the East or Midwest.
The Supreme Court in 2018 found the Professional and Amateur Sports Protection Act unconstitutional, effectively eliminating the federal law that had halted authorized sports wagering across the country and leaving it up to individual states to determine rules for sports betting.
Fast-forward to 2021, when commercial gaming revenue in the United States topped $53 billion. Gambling generated nearly $11.7 billion in tax revenue for the 33 states (and Washington D.C.) with some form of legalized sports betting, according to data from the American Gaming Association.
Twenty-four states and Washington, D.C., allow mobile sports betting activity, as of March 2023. Florida took legal online sports bets from November to December 2021, until a federal judge struck down the agreement. The state has halted legal sports gaming for now. Maine, Massachusetts, and Nebraska are some of the states that recently legalized sports betting in some way. Those states are expected to roll out plans, projects, or further regulatory actions in 2023.
- 2021 tax revenue: $458.8 million
- 2020 tax revenue: $309.3 million
- Year-over-year change: 48.3%
Despite introducing a few sports betting bills, Missouri has stalled legalizing sports betting at the state legislature level. Video lottery terminals and tax rates are some of the reasons various bills have failed. Supporters hope a bill can pass this year.
Sports gambling is legal in all the states surrounding Missouri. Neighboring Kansas rolled out legal betting in 2022. Missouri residents and Chiefs fans in Kansas City, Missouri, can simply cross a river to bet in Kansas. However, Kansas has not generated as much tax revenue from sports gambling as expected, per the Kansas City Star.
- 2021 tax revenue: $562.0 million
- 2020 tax revenue: $350.9 million
- Year-over-year change: 60.2%
New Jersey took sports gambling to the Supreme Court in 2018. The state was the third to take a legal bet. The first sportsbook opened in 2018, with some stadiums now offering legalized sports wagering.
Yet, betting on in-state collegiate games and events is prohibited. New Jersey is among the most robust and competitive states for sports betting, according to Legal Sports Report.
- 2021 tax revenue: $573.1 million
- 2020 tax revenue: $421.3 million
- Year-over-year change: 36.0%
In-person betting launched in October 2021. Online sportsbooks launched in 2022. They are one of the only states that legalized online sports betting in the South.
The Louisiana Lottery also gained a broad permit to place betting kiosks in restaurants, bars, and truckstops. The state makes a 10% tax rate on retail sports betting revenue. And they charge 15% on online/mobile sports betting revenue.
- 2021 tax revenue: $607.6 million
- 2020 tax revenue: $174.4 million
- Year-over-year change: 248.5%
Michigan launched in-person betting in March 2020 while online sports betting commenced in early 2021. The tax rate is 8.4% for commercial and tribal sportsbooks and 9.65% for online sportsbooks.
The state's operator licensing fees and renewals are among the lowest in the country. Michigan ranks in the top 10 for all-time dollars bet.
- 2021 tax revenue: $654.8 million
- 2020 tax revenue: $391.7 million
- Year-over-year change: 67.2%
Indiana legalized sports betting in 2019. Retail and online sportsbooks were launched later in the same year: It was one of the fastest sports gambling legalization turnarounds.
The action does not include collegiate prop bets or in-play wagers. The state takes a 9.5% tax rate on sports betting revenue. Indiana also charges for licenses and licensing renewals.
- 2021 tax revenue: $759.3 million
- 2020 tax revenue: $487.9 million
- Year-over-year change: 55.6%
Ohio legalized sports gambling in late 2021. Several sportsbooks launched in January 2023. Operators pay a 10% tax rate.
A sports gaming profits education fund gets 98% of that revenue, with the rest supporting and alleviating sports wagering addiction. The state also charges for a variety of licenses. More legal options should come to the state soon.
- 2021 tax revenue: $814.4 million
- 2020 tax revenue: $507.8 million
- Year-over-year change: 60.4%
Voters approved sports betting in Maryland in November 2020. State legislators passed bills facilitating wagering in April 2021. The state's first retail sportsbook opened in 2021, with online sportsbooks allowed in November 2022.
There are 60 licenses available for online sportsbooks. That means there should be even more online gaming options and more tax revenue coming to the state over the next few years, according to the Legal Sports Report. The state has a 15% tax rate on sports betting revenue. Maryland also charges licensing fees based on size and offerings.
- 2021 tax revenue: $1.0 billion
- 2020 tax revenue: $609.5 million
- Year-over-year change: 67.9%
Nevada legalized retail sports betting in 1949. It has some of the oldest state gambling laws, with online sports wagering coming along in 2013. Users must enter the casino to register in person before placing bets online.
Nevada takes 6.75% of sports betting revenue for the state general fund. It was the only state with legal sportsbooks until 2018. Tax revenue could go down as more states legalize sports betting.
- 2021 tax revenue: $1.1 billion
- 2020 tax revenue: $495.2 million
- Year-over-year change: 121.6%
Sports betting has been legal at New York's commercial casinos since 2013, but it was often more convenient to go to neighboring New Jersey for sports wagering. Today, the state is among the United State's most significant sports markets, with New York City representing a rapidly growing sector.
The first in-person sportsbooks were launched in New York in 2019. Nine online sportsbooks were launched in 2022—each paid 51% of revenues to the state in taxes in 2022. The state generated more than $909 million in revenue in its first year of legal mobile sports betting, with more than $16 billion wagered.
All betting on in-state collegiate games and events, including player prop bets, is prohibited.
- 2021 tax revenue: $2.0 billion
- 2020 tax revenue: $1.2 billion
- Year-over-year change: 69.8%
The home of the Pittsburgh and Philadelphia sports markets holds the #1 spot for tax revenue from sports betting. The die-hard nature of Steelers, Eagles, 76ers, Penguins, Flyers, Phillies, and Penn State fans helps the state secure such high revenue in gambling taxes. Pennsylvania also has one of the highest tax rates, at 36%.
Online sports gaming came to the state in 2019, a year after retail sportsbooks opened. Many of the top online sportsbooks have a presence in the state. There are few restrictions on sports gambling, but it is not legal to place specific prop bets on individual players' statistics. Users must be 21.
This story originally appeared on OLBG and was produced and distributed in partnership with Stacker Studio.