With college basketball fans in the thick of March Madness, they have more opportunities than ever before to bet on their favorite teams. Sports betting has gradually expanded nationwide since the Supreme Court eliminated the federal prohibition in 2018.
There are now 29 states, in addition to Washington, D.C. and Puerto Rico, that allow sports betting. Seven other states—Arizona, Florida, New Mexico, North Dakota, North Carolina, Washington and Wisconsin—do not have state-approved gambling but have worked with Native American governments to authorize it at tribal casinos. Twenty-seven of the states that have authorized sports betting also allow betting on mobile devices.
All of the commercial casino gaming states have now authorized sports betting, but they aren’t the only ones: Eight of the states that have legalized sports betting don’t have casino-style gambling and are offering sports betting as a lottery product (Washington, D.C., Montana, New Hampshire, North Dakota, Oregon, Tennessee, Virginia and Wyoming).
2023 Legislative Proposals
Eight states passed legislation to implement sports betting in 2021, but the rate of adoption has started to slow now that most states have acted. Just three more states—Kansas, Massachusetts and Maine—joined the sports betting bandwagon in 2022. In 2023, legalization measures have been introduced in at least eight states, including Georgia, Hawaii, Minnesota, Missouri, North Dakota, South Carolina, Texas and Vermont. Delaware and Mississippi have pending proposals to study or authorize internet sports betting as an addition to existing operations at brick-and-mortar locations.
While about 17% of Americans participate in March Madness-related wagering, there are several sports betting states that may not get in on the action. All states limit the scope of the events that can be wagered on and none allow wagering on high school athletic events.
The legality of collegiate sports betting varies. Some states enforce a blanket ban, while others ban betting on contests that take place in-state or that feature an in-state college team. A handful of states ban betting on most collegiate athletic events but have made exceptions for “contests that are part of a collegiate tournament,” which presumably allows betting on events like March Madness. Maine has a similar exception for betting on collegiate tournaments but still prohibits betting on any tournament games involving a Maine college.
Statutory Betting Restrictions on Collegiate Athletic Events
- Blanket prohibition: Delaware, New York, Oregon, Rhode Island
- No betting on any in-state collegiate events and no betting on any in-state teams, regardless of location: Washington, D.C., Iowa, Nebraska, New Hampshire, South Dakota, Virginia
- No betting on in-state collegiate events or in-state teams, except for tournaments: Connecticut, Massachusetts, Maine, New Jersey
- No restrictions on collegiate athletic events: Colorado, Illinois, Indiana, Kansas, Maryland, Michigan, Mississippi, Montana, Nevada, Louisiana, Ohio, Pennsylvania, Tennessee, West Virginia, Wyoming
Mobile Betting Makes a Difference
Twenty-seven states currently have mobile gaming operations up and running or have passed legislation to implement them. The expansion into internet gaming undoubtedly appeals to the sports betting target market, which tends to be younger and more tech-savvy. While there are valid concerns that making gambling opportunities available online will lead to higher rates of gambling addiction, the evidence suggests that mobile gaming creates a more productive revenue stream.
In the handful of states that offer only retail sports betting, revenue generated is relatively paltry compared with the most productive mobile gaming.
New York’s experience with mobile gaming expansion best illustrates the growth that internet betting can provide. When sports betting was legalized, only brick-and-mortar retail operations could offer it. The entire state generated less than $2 million from retail sports betting in fiscal year 2021. But after authorizing mobile bets halfway through fiscal 2022, New York had generated over $300 million in tax revenue and had the country’s largest sports betting market by the end of last year.
In the other most productive sports betting states, the lion’s share of the betting activity takes place on mobile platforms as well. In New Jersey, Pennsylvania and Indiana, revenue from mobile sports betting accounts for over 80% of total receipts.
Revenue Trends
Nationwide, sports betting revenues continued to grow through 2022. In several of the first states to legalize, however, there are signs that revenues have become cannibalized by emerging markets in neighboring states. New Jersey and Pennsylvania both saw tax revenues plateau or decline slightly after strong growth the year before, likely due in part to large emerging markets in New York and Ohio. Many states are now generating tens to even hundreds of millions of dollars in sports betting revenue. While significant, it is helpful to consider these numbers in context of other gambling revenues; sports betting, even in the most productive states, brings in about 10 times less revenue than the lottery and is a fraction of total casino gambling revenue.
Tax Rates
The approach to setting tax rates varies widely. A few states have a relatively higher tax rate, between 36% and 51%, and states with lottery-run operations take half of the revenue or just revenue minus expenses. Most states have settled on tax rates between 10% and 15%, with several states slightly above or below that range. Iowa has the lowest rate at 6.75%.
In general, the tax rates are the same for retail operators and mobile operators, but a handful of states apply a higher rate for mobile betting, which is typically intended to give a bit of an advantage to brick-and-mortar operations. In addition to its land-based and online rates, New Jersey has a third tax rate of 14.25% for racetrack-based online betting. Most betting taxes are imposed at a flat rate, but Arkansas and Mississippi have adopted graduated structures.
Table 1. Select State Sports Betting Revenues
|
Arkansas*
|
FY 2020: $312,689
FY 2021: $1,120,529
FY 2022: $1,110,616
|
|
Colorado
|
FY 2021: $8,144,673
FY 2022: $12,442,188.01
|
|
Delaware*
|
FY 2020: $11,315,301
FY 2021: $14,302,112
FY 2022: $9,520,810
|
|
Illinois
|
FY 2021: $60,895,949
FY 2022: $98,585,341
|
|
Indiana
|
FY 2020: $7,457,247
FY 2021: $22,662,070
FY 2022: $31,242,412
|
|
Iowa
|
FY 2020: $1,788,198
FY 2021: $6,072,763
FY 2022: $9,585,341
|
|
Michigan
|
Calendar Year 2021: $3,813,680
CY 2022: $14,610,113
|
|
Mississippi*
|
FY 2020: $4,392,978
FY 2021: $7,999,874
FY 2022: $6,993,086
|
|
Nevada
|
FY 2020: $17,443,282
FY 2021: $27,543,442
FY 2022: $29,167,630
|
|
New Hampshire
|
FY 2021: $17,956,535
FY 2022: $23,916,631
|
|
New Jersey
|
Calendar Year 2020: $49,432,401
CY 2021: $100,050,610
CY 2022: $97, 879,592
|
|
New York
|
FY 2020: $964,671
FY 2021: $1,859,905
FY 2022: $308,333,132
|
|
Pennsylvania
|
FY 2020: $38,666,418
FY 2021: $105,008,722
FY 2022: $107,343,524
|
|
Rhode Island
|
FY 2020: $9,540,293
FY 2021: $18,455,619
FY 2022: $20,272,254
|
|
Tennessee
|
Calendar Year 2021: $39.3 million
CY 2022: $68.1 million
|
|
Virginia
|
Calendar Year 2021: $20,240,022
CY 2022: $51,765,685
|
|
West Virginia
|
FY 2020 Privilege Tax: $1,914,670
FY 2021: $4,099,848
FY 2022: $4,484,560
|
*Does not allow mobile sports betting.
Table 2. Sports Betting Tax Rates and Contributions to State Funds
|
State
|
Tax Rates
|
Contributions to State Funds
|
|
Arkansas
|
13% on first $150 million net receipts; 20% on gaming receipts exceeding $150 million
|
The majority of revenue goes to the state’s general fund. Race purses, county and city governments are the other beneficiaries.
|
|
Arizona
|
8% for retail; 10% for mobile
|
90% of revenues go to general fund, with remainder available to cover costs of regulation.
|
|
Colorado
|
10%
|
Revenue funds the implementation of the state water plan and other public purposes.
|
|
Delaware
|
State receives 50% of total win
|
General fund
|
|
District of Columbia
|
10%; revenue minus expenses for state online lottery operations
|
First $200,000 directed to the Department of Behavioral Health for gambling addiction and treatment programs; of the remainder, half is used for the Birth-to-Three for All DC Amendment Act of 2018, and half is deposited in the Neighborhood Safety and Engagement Fund.
|
|
Illinois
|
15%
|
Capital Projects Fund (improvements to roads, bridges, mass transit, schools, universities).
|
|
Indiana
|
9.5%
|
General fund, cities and counties, gambling addition services.
|
|
Iowa
|
6.75%
|
Deposited in Sports Wagering Receipts Fund to be used as directed by the General Assembly.
|
|
Kansas
|
10%
|
Revenues are dedicated to the White Collar Crime Fund, the Problem Gambling and Addiction Grant Fund, Attracting Professional Sports to Kansas Fund and the Lottery Operating Fund.
|
|
Louisiana
|
10% for retail; 15% for mobile
|
Revenues go to the Bond Security and Redemption Fund and are credited as follows: 2% to the Behavioral Health and Wellness Fund; 25% to the Louisiana Early Childhood Education Fund; 10% to the Sports Wagering Local Allocation Fund; 2.5% Sports Wagering Purse Supplement Fund; 2% to the Disability Affairs Trust Fund; 2% to the disability-focused disaster preparedness and response fund; and the remainder to general fund.
|
|
Maryland
|
15%
|
Revenues go to the Lottery and Gaming Control Agency to reimburse for regulation expenses, with 5% to the Small, Minority-Owned, and Women-Owned Business Sports Wagering Assistance Fund, and the remainder to the Blueprint for Maryland’s Future Fund.
|
|
Michigan
|
8.4%
|
-Revenues go to the school aid fund and to local government programs.
|
|
Mississippi
|
State tax rate ranges from 4%-8% depending on monthly gross revenue; there is a 4% local tax rate as well.
|
Of the revenue collected, $3 million goes to the general fund, $3 million to a bond sinking fund, and the state highway fund.
|
|
Montana
|
State collects revenue minus expenses.
|
First $12.4 million goes to the general fund; excess goes to STEM scholarship fund.
|
|
Nebraska
|
20%
|
70% to the Property Tax Credit Cash Fund; 25% allocated to local governments where gambling is authorized; 2.5% allocated to the general fund; 2.5% allocated to problem gambling prevention and treatment.
|
|
Nevada
|
3.5% of all the gross revenue of the licensee which does not exceed $50,000 per calendar month.
4.5% of all the gross revenue of the licensee which exceeds $50,000 per calendar month and does not exceed $134,000 per calendar month.
6.75% of all the gross revenue of the licensee which exceeds $134,000 per calendar month.
|
Revenue goes to gaming funds in state aid education, local government, the general fund, and problem gambling.
|
|
New Hampshire
|
Lottery’s agreement with Draft Kings gives the state 51% of gross gaming revenue from online wagering and 50% of gross revenue from retail wagers.
|
Education trust fund, gambling addiction services.
|
|
New Jersey
|
8.5% of gross sports pool revenues, 14.25% of online sports betting revenues.
|
Casino Revenue Fund (supports a variety of health and human services programs), general fund, Atlantic City marketing/promotion, local economic development.
|
|
New York
|
10%
|
Revenue is allocated to statewide education programs, local municipal and county governments, and provides property tax relief to New York citizens.
|
|
Ohio
|
10%
|
Revenues are first applied to operator sports wagering tax overpayment claims and state taxation department expenses incurred in administering the sports wagering tax levy; of the remainder, 98% goes to the sports gaming profits education fund and 2% goes to the problem sports gaming fund.
|
|
Oregon
|
State collects revenue minus expenses.
|
Revenue from the lottery’s sportsbook app is used to help pay down the state’s public pension liability.
|
|
Pennsylvania
|
34% tax with a 2% local assessment
|
General fund.
|
|
Rhode Island
|
51% of sports wagering revenue
|
General fund.
|
|
South Dakota
|
9%
|
40% to tourism promotion; 10% to Lawrence County; remaining 50% is divided among the State Historic Preservation Grant and Loan Fund, gambling addiction treatment, the city of Deadwood, municipalities and school districts in Lawrence County, and the general fund.
|
|
Tennessee
|
20%
|
80% of revenue goes to the Lottery for Education account, 15% to general fund, 5% to mental health and substance abuse services.
|
|
Virginia
|
15%
|
2.5% to problem gaming initiatives, 97.5% to the general fund.
|
|
West Virginia
|
10% of licensee’s adjusted gross sports wagering receipts
|
First $15 million to the Lottery Fund; additional revenue goes to the Public Employees Insurance Agency Financial Stability Fund.
|
|
Wyoming
|
10% of gross revenues
|
$300,000 each year goes to problem gambling treatment; remainder is allocated to the general fund.
|
Sources: American Gaming Association, Bloomberg BNA, NCSL research
Jackson Brainerd is a program principal in NCSL’s Fiscal Affairs Program.