Tax Map Thursday: Online Sports Betting Taxes

Since the U.S. Supreme Court’s 2018 decision in Murphy v. NCAA overturned the federal ban on sports betting, the industry has grown at lightning speed. What was once confined to Nevada has now become a nationwide trend. Today, 40 states and Washington, D.C. have legalized some form of sports betting, and 30 of those allow online wagers.

The Tax Angle

While legalization has spread quickly, the way states tax sportsbook revenue varies widely—and those decisions have major consequences for state budgets.

• High Tax States: New Hampshire, New York, Oregon, and Rhode Island top the list with rates reaching as high as 51% on sportsbook revenue.

• Revenue Impact: Since 2018, states have collectively raised over $2.8 billion in tax revenue from legal sports betting.

Federal vs. State Policy

The growth of online betting also raises bigger policy questions. How should states design their tax systems to balance revenue generation with market competitiveness? This question is becoming more pressing with the passage of the One Big Beautiful Bill Act (OBBBA), which introduced new federal rules for gambling income. Some analysts warn that these changes could undercut the effectiveness of state-level tax collections.

How States Stack Up

Here’s a look at how states are currently taxing online sports betting revenue, based on Tax Foundation data (as of August 1, 2025):

• Low Tax Rate (<10%)
  Nevada, Iowa, Michigan, Indiana

• Medium Tax Rate (10–20%)
  Arizona, Colorado, Kansas, Kentucky, Louisiana, Maine, Maryland, Virginia, West Virginia, Wyoming

• High Tax Rate (>20%)
  New York, New Hampshire, Oregon, Rhode Island, Illinois, Delaware, Pennsylvania, Vermont, D.C., North Carolina, New Jersey, Massachusetts

The Takeaway

The legalization of sports betting has opened up a new stream of revenue for states, but it’s far from a one-size-fits-all system. Some states are betting on high tax rates, while others are keeping them low to stay competitive. With the added wrinkle of new federal tax rules, the future of sports betting revenue may be just as unpredictable as the games themselves.