As states moved to pass legislation authorizing legalized sports wagering after the U.S. Supreme Court ruled in Murphy v. NCAA (May 14, 2018) that states can authorize such activity under the Tenth Amendment, the message was uniform as to how the expected revenues would be used: they were going to generate funding for public services with no tax increases. Now that we have been through an entire generation of legal sports wagering, it is time to ask if the promise of generating these additional funds has been realized and where those monies are really being spent. It appears the answers vary significantly from one jurisdiction to another; they reflect fundamentally different governmental priorities; and raise legitimate concerns as to whether the societal problems associated with expanded gaming opportunities are being appropriately funded.

The Revenue Picture: How Much Money Are We Talking About?

Sports betting tax revenue is legitimate, significant and increasing – yet it nearly always falls short of what was forecasted when debates about legalizing sports gambling took place. In 2025, states were expected to collect approximately $3.2 billion in sports betting tax revenue; this figure is estimated to be an increase from the roughly $1.8 billion in sports betting tax revenue collected by states in 2023. The amount of money states have been collecting from taxes on sports wagering has increased dramatically (growth) since 2023, however, the actual dollar-amount of these revenues are so miniscule they represent less than .05 percent of all state budgets. Although sports wagering is generating new revenues for some state governments, sports wagering does not constitute a shift toward a “new” way of funding state government.

Infrastructure, Conservation, and Creative Earmarks

Some States have chosen to use the legalizing of Sports Betting to Fund Priorities That may have difficulty finding their way into Budgets if they were funded on a standard basis.

The most innovative example of this can be found in Colorado. Voters approved legalized sports betting through ballot initiative in 2019 while also designating 100 percent of tax revenue for water conservation and infrastructure – a truly unique earmark connecting gambling revenues to a pressing environmental issue. Tens of millions of dollars of funding for Colorado’s Water Plan has been allocated from sports betting revenues – primarily towards:

• Restoration of streams in drought affected areas
• Programs to increase agricultural water efficiency
• Upgrades to rural water systems infrastructure
• Easements protecting watershed land for conservation purposes

Colorado’s Model has garnered interest from other western states dealing with water scarcity. The connection between sports betting and water conservation is arbitrarily related; however, the structure of ballot initiatives forced a specific, trackable commitment to fund these projects which have generally succeeded.

Arkansas allocated a percentage of its Sports betting revenue to state parks/tourism. Kansas allocated some of its sports betting revenue to a problem gambling assistance program/economic development. Iowa allocates its relatively small tax revenues derived from sports betting between the general fund/department of public health’s gambling treatment program. The variety of earmarks reflects the ad hoc nature of legalization negotiations rather than any national framework for how funds are allocated.

Problem Gambling: Chronically Underfunded

The report now gets serious. The expansion of gambling will cause greater gambling harms – and this has been a fact as established by the public health record. Problem gambling affects about one to three percent of adults and there are differences in the risk profile created by the mobile and fast access to sports betting compared to the traditional casino environment.

Although the National Council on Problem Gambling recommends that states should dedicate at least one percent of their gaming taxes for problem gambling services most states do not meet these standards.

State	Est. Sports Betting Tax Revenue	Problem Gambling Allocation	% of Revenue
New York	~$950M	~$6M	0.6%
New Jersey	~$95M	~$1.2M	1.3%
Pennsylvania	~$185M	~$1.5M	0.8%
Colorado	~$30M	~$1.6M	5.3%
Tennessee	~$80M	~$2M	2.5%
Illinois	~$210M	~$0.8M	0.4%

Colorado has once again demonstrated itself to be an exception through the use of a formalized ballot initiative process, which ensured a significant allocation to problem gambling from a portion of revenues collected by the majority of other U.S. states. With regard to allocating less than one-half of one percent of gross gaming revenue toward services for individuals who experience problems with their gambling activities, Illinois is positioned as having the largest difference in this area when compared to all other U.S. jurisdictions. As such, public health advocates continue to highlight this disparity during legislative hearings.

The result of this issue is that treatment programs for problem gambling have created lists of potential clients awaiting treatment. The level of outreach to provide support for those experiencing difficulties related to their gambling has been limited. Furthermore, because the demand for service exceeds the capacity of the staff at the 1-800-GAMBLER hot line – which is utilized primarily as a source of assistance for those seeking additional information or assistance related to issues surrounding their own personal experiences related to gambling – the employees are significantly overburdened relative to the number of calls received per day within states where there are active sports betting operations.

Tribal Communities and Revenue Sharing

The way revenue is distributed in states where there are extensive tribal gaming operations can also impact the amount of revenue available to states through taxes. Revenue sharing provisions within tribal compacts may be required. This creates different structures when it comes to sports betting regulations and the resulting distribution of revenue.

An example of an organized inclusion model of tribal involvement can be seen in Michigan. In order to include tribal entities in the regulation of sports betting and iGaming (online gaming) within the state, the State of Michigan entered into online gaming compacts with its Indian tribes. Within those compacts, tribal entities retained all revenue derived from their respective participation in regulated online gaming and sports wagering activities; they were not entitled to share a portion of that revenue with the State. All together, the collective revenue from digital gaming products has provided considerable support to the tribal governments’ services and programs including healthcare services and economic development projects located on the reservations of the participating tribes.

States such as California have had difficulties passing legislation authorizing sports wagering due to the contentious nature of the disputes between tribal gaming operators and commercial gaming operators regarding the structure of the market and allocation of revenue. For several years, Florida has been unable to develop a functioning regulatory scheme for sports wagering as a result of ongoing litigation related to the terms of the compact entered into by the Seminole Tribe and Hard Rock International. In many cases, the issue involving tribal gaming organizations may be the most difficult and contentious element of a state’s sports wagering revenue picture. States which resolved these issues at an earlier stage (e.g., Michigan) appear to have developed a more efficient and fairer regulatory scheme.

What Good Sports Betting Revenue Policy Looks Like

There are several ways of differentiating “good” policy-making from “bad”, but this paper has identified four primary differences that appear to distinguish the good from the bad:

Avoidance of the “additionality fallacy”: To ensure that earmarked funds do not lead to cuts in other areas of budgetary expenditure, net-impact reporting (i.e., reporting on the net effect of earmarks) should be required.

Setting minimum levels of allocation for problem gambling: The National Center on Problem Gambling recommends that states allocate at least 1 percent of their gross gaming revenue toward problem gambling issues. This recommendation should serve as a minimum standard for legislation rather than a goal.

Equitable treatment of tribes from day one: Tribes will likely face less litigation if they can reach agreement with states on a framework for sports wagering prior to when either party initiates formal legalization proceedings; the most equitable outcome will also result.

Maximizing sustainable tax rates: While maximizing tax revenue and maintaining a healthy market may both be desirable, they need not occur simultaneously. In addition, even though a well-functioning market at a 15 percent tax rate may ultimately produce greater aggregate tax revenues than a market severely constrained by high taxes at a 40 percent tax rate, these two markets would produce vastly different products and services.

• Annual transparency: If each year, states provide annual transparent reports regarding how money raised through sports betting have been allocated and which activities or programs those monies funded, then public confidence and support for further reform will be fostered.