The U.S. Supreme Court’s decision to nullify the Professional and Amateur Sports Protection Act (PASPA) in May 2018 granted states the freedom to create their own laws regarding sports gambling. This resulted in the fastest expansion of a new source of taxation in United States history. In less than eight years, forty states and Washington D.C. have established functional legal sports gaming markets with billions of dollars in annual taxes being generated from a business practice that previously operated largely off-shore or in the black market.
The overall picture of sports betting taxation for states is complex significantly impacted by how tax rates are structured; whether mobile sports wagering is allowed; the size of a state’s population; the level of interest in local sporting events; and how many operators exist within a state. For example, the State of New York generates over $800 million annually from sports betting taxes while Wyoming produces less than $5 million per year. While both are “states where sports wagering is legal,” that is about all they have in common.
How Sports Betting Tax Revenue Works
Sports betting operators are taxed on gross gaming revenue (GGR) and NOT on the entire amount of wagers placed (the “handle”) by patrons. Gross Gaming Revenue is calculated as follows: Handle minus total payouts made to patrons in winnings. The actual sportsbook margin for a given jurisdiction can be approximately 7-9 percent of the total handle. The net margin is then applied against each state’s respective tax rates.
Key Terms
- The “handle” is total dollars wagered by betters. It is the headline number that regulators and trade associations report.
- Gross gaming revenue (GGR) is the amount of money that is left over after paying out winners. GGR is usually around 7-9 % of the handle. In most cases this will be the gross income that will be used as the taxable base for each individual state’s taxes.
- Adjusted Gross Income (AGI), also known as Adjusted Gross Revenue (AGR), is the GGR less allowable promotional credits, and other voided wagers. Some states use AGI instead of GGR. If an operator uses AGI instead of GGR they are allowed to deduct their promotional credits and some other items, thus reducing the amount of taxable revenue.
- Tax Rate: Tax rates vary by state. They can range anywhere from 6.75% (Nevada) to 51% (New York). They apply to either GGR or AGR depending on how the state chooses to tax its regulated activities.
- Tax Revenue: Taxable Revenue = GGR (or AGR) * Tax Rate; This is the amount of money that goes into the State Treasury.
For example: Let us assume a state has recorded $10 Billion in handle from its sportsbook activity during a fiscal year. The GGR may have been about $800 Million. Therefore at a 20% tax rate, the state receives $160 Million. However, with a tax rate of 51%, as found in New York, the state receives $408 Million. Since the margin of the operators is very thin it could possibly cause them to think twice before entering or investing in the state.
Sports Betting Tax Revenue by State: Full Rankings (2025 Fiscal Year)
| State | Tax Rate (GGR) | Est. 2025 Handle | Est. Tax Revenue | Mobile Legal? |
| New York | 51% | $23.1B | $834M | Yes |
| New Jersey | 13% / 14.25% | $13.8B | $243M | Yes |
| Pennsylvania | 36% | $8.2B | $211M | Yes |
| Illinois | 15-40% (tiered) | $11.6B | $198M | Yes |
| Indiana | 9.5% | $5.9B | $78M | Yes |
| Michigan | 8.4% | $5.1B | $60M | Yes |
| Colorado | 10% | $5.6B | $55M | Yes |
| Virginia | 15% | $5.0B | $103M | Yes |
| Tennessee | 20% (on handle) | $3.8B | $76M | Yes |
| Arizona | 8% | $4.4B | $49M | Yes |
| Ohio | 20% | $8.7B | $235M | Yes |
| Maryland | 15% | $3.2B | $61M | Yes |
| Massachusetts | 20% | $3.9B | $85M | Yes |
| Louisiana | 15% | $2.1B | $36M | Yes |
| Iowa | 6.75% | $1.8B | $17M | Yes |
| West Virginia | 10% | $0.9B | $12M | Yes |
| Kansas | 10% | $1.1B | $14M | Yes |
| Connecticut | 13.75% | $2.3B | $44M | Yes |
| New Hampshire | 10% | $0.8B | $11M | Yes |
| Rhode Island | 51% | $0.6B | $22M | Yes |
| Nevada | 6.75% | $8.1B | $74M | Yes |
| Oregon | State monopoly | $1.2B | $48M | Yes |
| Washington D.C. | 10% | $0.4B | $5M | Yes |
| Mississippi | 12% | $0.7B | $11M | No |
| Arkansas | 13% | $0.5B | $8M | No |
| Delaware | State monopoly | $0.3B | $9M | No |
| Montana | State monopoly | $0.2B | $6M | Limited |
| Wyoming | 10% | $0.4B | $4M | Yes |
| New Mexico | No tax statute | $0.5B | N/A | Tribal only |
| North Carolina | 18% | $4.8B | $112M | Yes |
| Kentucky | 9.75% | $2.2B | $28M | Yes |
| Maine | 10% | $0.3B | $4M | Yes |
| Nebraska | 20% | $0.4B | $9M | No |
| Vermont | 20% | $0.2B | $5M | Yes |
| Puerto Rico | 15% | $0.6B | $12M | Yes |
| Florida | Tribal compact | $4.1B | N/A* | Yes (Seminole only) |
| California | Not legal (retail only) | – | – | No |
| Texas | Not yet legal | – | – | – |
| Georgia | Pending legislation | – | – | – |
The Top 5 States by Sports Betting Tax Revenue
New York – $834 Million
New York is in a class by itself. In January 2022 New York became the first U.S. State to launch mobile sports betting. With a 51 percent tax rate on gross gaming revenue (GGR), it also has the highest tax rate among all U.S. States that offer mobile sports betting and a competitive multi-operator market. Industry insiders believed that no company would be able to enter the New York market with such low profit margins. However, FanDuel and DraftKings did enter into this new market. There was a great deal of interest in New York due to its high population density; strong passion for sports; and close proximity to New Jersey’s well-established market which had been attracting many NY residents who had previously traveled to NJ to place bets. As a result, New York has generated the most handle and tax revenue in the U.S. with regards to mobile sports betting. Tax revenue from mobile sports betting will go towards supporting public education. It is currently being debated whether or not the 51% tax rate is sustainable over time as the mobile sports betting market continues to grow. Companies operating in the market have already begun lobbying for lower tax rates.
New Jersey – $243 Million
New Jersey was first to open. It initiated legal action against the NCAA in Murphy vs. the NCAA resulting in the passage of new law ending PASPA. Within a week of this decision NJ opened its sports betting program. NJ charges a relatively low 13 percent on all GGR from Internet bets (and 14.25 percent on retail). This is likely why NJ attracts so many operators and also why handle comes in at number two every year after NY.
While NJ does not retain as much money per dollar bet as do PA and NY due to their higher tax rates, a very competitive field of operators in NJ with very high capital investments results in an extremely large and increasing GGR base. Revenue from NJ sports betting goes into the states General Fund and is used to help pay for infrastructure in Atlantic City.
Ohio – $235 Million
The State of Ohio is one of the top 5 in the United States for online sports wagering. Sports wagering was introduced by the state in January 2023. At this time the state had an average Gross Gaming Revenue (GGR) tax of 20%. This was higher than most other gaming jurisdictions in the United States. However it was lower than jurisdictions with extremely high tax rates such as New York and Pennsylvania. The state has approximately 12 million people. Therefore, it has a very large potential customer base. In addition, there are several professional sports teams in the state including the Cleveland Browns (NFL), Cincinnati Bengals (NFL), Cleveland Cavaliers (NBA), Cleveland Guardians (MLB), Columbus Blue Jackets (NHL). With mobile wagering allowed throughout the state, sports wagering matured rapidly.
Pennsylvania – $211 Million
Pennsylvania levied the highest tax rate on all other competitive multi-operator states by imposing a 36% tax on gross gaming revenue (GGR) from online sports wagering (retail operators are taxed at 34%). The higher tax rates were specifically created in the legislation passed to expand gambling in the state in 2017. Although many operators continue to offer services in Pennsylvania, they likely invested less money in promoting their products and improving them than their competitors operating with lower tax rates – a fact supported by research showing the negative impact of high taxes on bettor value with odds being worse in Pennsylvania than those available to its neighbor, New Jersey.
Illinois – $198 Million
Illinois transitioned to a tiered tax system on Sports Betting in 2024; where tax levels are structured as follows: Operators with lower gross gaming revenues pay at the lowest rate of 15%; The highest-revenue operators pay at the maximum rate of 40%. Illinois is the first state to establish an income-based progressive tax model for sports betting, and it is attracting great interest from states that are reviewing their respective tax-rate models.
The States Missing Out: Illegal Market and Forgone Revenue
As of April 2026 twelve states had yet to legalize sports wagering. Reasons varied. Some were facing barriers due to their constitutions; others faced barriers related to political agreement on gambling issues; others needed to renegotiate a compact with Native American tribes that would allow them to offer legal wagering; and two large population markets – Texas and California – had attempted but failed either through ballot initiative or legislative action to establish sports wagering legalization.
The California Situation
California is probably the best example of lost revenue from legalizing mobile sports wagering. With almost 40 million people in its population and as many passionate fans for their professional sports teams (the Lakers, Dodgers, 49ers, Rams, Warriors, Padres, and Angels) – California could be expected to produce between $3 and $5 billion per year in total handle. In turn, this would be approximately $300-$600 million dollars annually in tax revenue for the State of California based on how much of that money is taxed, i.e., rate.
In 2022 two different propositions failed at the polls. One was supported by tribal gaming interest; the other was supported by commercial gaming companies such as DraftKings and FanDuel. Because of these competing interests among tribal gaming and commercial gaming no compromise framework has emerged yet. Since then legislation has been proposed but none has made it out of committee to be voted on. Right now Californians can either go across the border into Nevada to place bets, use an offshore bookmaker to make bets online, or take advantage of limited opportunities through tribal gaming entities within the state.
Texas
Texas is the second most populous of all states with no legislation regulating sports gambling. Due to its biennial legislative session (only meeting each other once per year) and the influence of many socially-conservative groups within the Republican party, bills to allow for the regulation of sports betting have been defeated several times. Estimates of the amount of money generated annually through taxation by the state if it were allowed to regulate sports betting are at least $200 million to as much as $400 million. Historically, Texas has avoided taxing personal or business income and generates large amounts of revenue through property taxes and retail sales taxes.
Offshore and Illegal Market Competition
Across all states, there are also offshore or gray-market sports wagering entities that do not pay U.S. federal taxes as an additional competitor to legal sports wagering. According to the American Gaming Association, it has been estimated that illegal sports wagering continues to account for approximately one-third of the U.S. legal sports wagering market size; at about $50 – $60 billion annually in handle.
This number represents the maximum amount that could be lost by states due to competition with offshore sports wagering operations for all time.
The offshore sports wagering industry provides consumers no protections related to their gaming experience. In addition to providing no protections to consumers, they provide consumers with no resources to address problem gaming behavior. They also generate no state tax base.
Higher state tax rates may cause some sports gamblers to go back to offshore wagering if they perceive a difference in terms of better odds and/or promotion offered by legal operators compared to offshore operators.
Mobile access to legal sports wagering is the single greatest factor in the capture of the legal sports wagering market. States that have limited or no mobile access to legal sports wagering (Arkansas, Mississippi, Nebraska) generally continue to perform below expectations based on population.
Total US Sports Betting Tax Revenue: The National Picture
|
Year |
Approx. Total US Legal Handle | Approx. Total Tax Revenue | States with Legal Betting |
| 2019 | $13.5B | $220M | 8 |
| 2020 | $21.5B | $350M | 14 |
| 2021 | $57.2B | $950M | 22 |
| 2022 | $93.2B |
$1.7B |
28 |
| 2023 | $119.8B | $2.4B | 33 |
| 2024 | $135.5B | $2.9B | 36 |
| 2025 (est.) | $148.7B | $3.3B |
38 + DC |
What Sports Betting Tax Revenue Actually Buys
The majority of the public discourse surrounding sports betting legalization has focused on how much money states will lose by not allowing it. It is helpful to be exact as to which type of government service these monies would pay for with regards to public services.
In terms of the national aggregate of approximately $3.3 billion projected for 2025:
- The aforementioned amount represents an approximate annual operating budget of a medium-sized U.S. City.
- This amount could cover the salary of approximately 40,000 public school teachers at the national average.
- This amount is about six percent of total annual state lottery revenue (approximately ~$55 billion).
- The amounts are slightly over five times what all states receive in total annual alcohol taxes ($66 million) based on the most recent data available.
- The amounts stated above represent slightly under two percent of total state income tax revenues received nationwide.
Nothing above reduces the significance of the revenue generated from sports betting taxes – especially in those states which have earmarked the revenue for specific public goods such as Colorado’s Water Conservation Fund or Ohio’s Education Supplement. However, nothing above indicates that sports betting tax revenue, though increasing and real, is merely supplemental fiscal tool versus transformative fiscal tool. States that have allowed sports betting solely for revenue purposes but have also failed to invest in developing their respective markets, providing mobile access to gamblers and establishing competitive licensing structures are potentially leaving more money uncollected then the “states without” comparative.
Conclusion
Sports betting has fulfilled expectations in terms of revenue generation – albeit inconsistently and to varying degrees depending upon specific state policies. In this context, the disparity between New York ($834 million) and Wyoming ($4 million) cannot be solely attributed to differences in population. Rather, these disparate totals reflect the strategic policy decisions each state made regarding tax structures, mobile accessibility, licensure of operators, and overall market composition. As such, states that were successful in making the correct policy decisions during the period of 2018-2021 have benefited from relatively stable and competitive markets. Conversely, states that established excessive tax rates, restricted mobile accessibility and/or proceeded at an unacceptably slow pace are currently operating below their projected capacity.
Increased future revenue generated by sports betting will derive from two primary sources. First, the maturation of markets most recently opened (e.g., North Carolina, Massachusetts, and Kentucky), and second, if/when California and Texas legalize mobile sports betting, which would likely represent the largest new markets since Nevada and Delaware initially began accepting wagers on sporting events. Should one of these two large states create a fully operational mobile sports betting market prior to the end of 2027 (approximately three years), annual U.S. sports betting tax revenues could conceivably approach or exceed $5 billion before 2030.
In conclusion, for regulators/policymakers, the lessons learned over the initial eight years of legalized mobile sports betting include the fact that design of taxation is equally important as is legalization of the activity. Therefore, a state with a legal market created with inappropriate taxation rates, limited mobile accessibility and/or insufficient competition among licensed operators may produce a fraction of the revenue that a state with a well-planned and implemented market may produce – not only for the state’s coffers, but also for players, legitimate operators and ultimately for credibility in the longer term of the legality of gaming activities.