Sports Betting Tax Revenue by State: A Comprehensive Breakdown

The legalization of sports betting across the United States has not only transformed the gambling landscape but also generated a significant stream of tax revenue for state governments. As more states embrace legal sports wagering, understanding how each jurisdiction handles taxation—and how much revenue it collects—provides insight into its economic impact. Below is a detailed overview of sports betting tax revenue by state, highlighting variations in tax structures and fiscal returns.

New York: The Revenue Titan

New York stands out as the highest revenue-generating state in the country for sports betting tax. Since legalizing mobile sports betting in January 2022, the state implemented a notably high tax rate of 51% on gross gaming revenue (GGR) for online sportsbooks. This aggressive rate helped New York collect over $700 million in tax revenue in its first full fiscal year. The funds are directed toward education, youth sports programs, and responsible gaming initiatives.

New Jersey: Early Adopter with Consistent Gains

New Jersey was one of the first states to legalize sports betting following the Supreme Court’s repeal of PASPA in 2018. The state applies an 8.5% tax on retail bets and 13% on online wagers. In 2023 alone, New Jersey reported over $100 million in sports betting tax revenue, with most proceeds supporting the state general fund.

Pennsylvania: A High-Tax Model

Pennsylvania has one of the highest effective tax rates in the country at 36% on sports betting revenue—34% for the state and 2% for local municipalities. Despite the steep tax, the market has flourished, generating over $130 million in tax revenue annually. Much of this funding is allocated to property tax relief, economic development, and public safety.

Illinois: Tiered and Growing

Illinois uses a graduated tax system: 15% on online sportsbook revenue and 17% on retail sportsbook revenue, with a recent legislative push to raise those rates even higher. In 2023, Illinois collected around $140 million in tax revenue from sports betting. The funds support capital improvement projects across the state.

Michigan: Moderate Rates, Strong Returns

Michigan’s tax rate on sports betting is 8.4% for online operators and 9.65% for commercial casinos. The market has expanded rapidly due to the legalization of both sports betting and online casinos. In 2023, Michigan’s sports betting tax revenue surpassed $30 million, funding the state’s School Aid Fund and First Responder Presumed Coverage Fund.

Colorado: Flat Rate with Dedicated Use

Colorado imposes a relatively low tax rate of 10% on sports betting operators’ net proceeds. However, it has directed much of its revenue—about $40 million cumulatively—to the Colorado Water Plan, addressing the state’s long-term water infrastructure needs.

Virginia: Competitive Market with Modest Tax Rate

Virginia imposes a 15% tax on adjusted gross revenue, which excludes promotional credits. The state generated around $55 million in tax revenue in 2023. These funds are directed to the General Fund and Problem Gambling Treatment and Support Fund.

Indiana: Consistent Performer in the Midwest

Indiana taxes sports betting revenue at a flat 9.5%. It consistently generates between $30 million to $40 million in annual tax revenue. The state uses this income to support infrastructure and regulatory oversight.

Tennessee: Unique Handle-Based Tax

Tennessee diverges from most states by taxing the handle (total amount wagered) at 1.85%, instead of taxing operators on their revenue. In 2023, this approach yielded over $70 million in tax revenue, supporting educational initiatives and mental health services.

Other Notable States

• Arizona: 10% tax on mobile, 8% on retail; collected $25 million+ in 2023
• Louisiana: 10% on online bets, 15% on retail; yielded $35 million+
• Ohio: Recently raised its rate to 20%, generating $100 million in its first year
• Massachusetts: 20% on online, 15% on retail; collected over $70 million since launch

States with Minimal or No Revenue

Some states, such as Montana and Oregon, operate state-run monopolies or limited markets that yield lower tax revenue compared to competitive models. Additionally, states like Alaska, Utah, and Texas have not legalized sports betting and therefore collect no tax revenue from it.

Conclusion

Sports betting has become a lucrative source of tax revenue for many U.S. states, with New York, Illinois, and Pennsylvania leading the charge. Tax rates and structures vary significantly, ranging from modest flat rates to aggressive revenue-sharing models. While revenue continues to grow, each state’s ability to balance regulation, market freedom, and taxation will determine the long-term sustainability and benefit of legalized sports wagering.