Legal sports betting has grown rapidly since the Supreme Court granted states the ability to establish online sports betting markets in Murphy vs. NCAA in 2018. Pre-Murphy, consumers could only bet legally in a handful of states, but today, 38 states and Columbia allow sports betting in some form.

However, sports betting markets vary substantially across states that have legal betting markets. Notably, states apply a range of different tax  rates (sometimes differentiating between online wagers and brick-and-mortar wagers), and access to legal sports betting can be quite limited.

Consumer access to legal betting markets is limited primarily by high barriers to entry for sports betting operators who wish to offer services in the state and by limits on the geographic locations at which players are allowed to place bets.

Common barriers facing operators include expensive licensing fees and requirements for online sportsbooks to partner with existing in-state brick-and-mortar operators. In Massachusetts, for example, sportsbooks must pay an initial fee of $5 million, with another $5 million renewal fee every five years. Sportsbooks in Pennsylvania are required to pay a one-time fee of $10 million and a $250,000 renewal fee every five years.

New jersey requires online sportsbook operators to partner with a licensed brick-and-mortar racetrack or casino in the state, while Ohio offers online sportsbooks the option to partner with a professional sports organization approved by the Casino Control Commission to offer mobile sports wagering.

Other states mandate a partnership with the state lottery commission or hand control of online sports betting markets to the state lottery commission. In Connecticut, online gaming operators wishing to offer services in the state must partner with a state-approved master gaming operator. Montana monopolized all sports betting under the Montana Lottery Commission.

Several states also restrict where players can gamble online. In Delaware, Mississippi, Montana, New Mexico, North Dakota, South Dakota, Washington, and Wisconsin, would-be gamblers can only place bets at select locations such as retail casinos, state-operated facilities, or tribal lands.

In other states, online wagers are treated differently from wagers placed in person. In Kentucky, Louisiana, Massachusetts, New Jersey, and New York, online wagers are taxed more heavily than retail (in-person) wagers.

While 38 states have legalized sports wagering in some capacity, bettors only have statewide access to online sports betting platforms in 27 states and the District of Columbia. New Hampshire, New York, and Rhode Island apply the highest tax rate to sportsbooks at 51 percent. Nevada and Iowa apply the lowest tax rates at 6.75 percent. Today’s map shows the distribution of online sports betting tax rates across US states.

The market for sports betting will likely continue to grow substantially. Texas and California don’t yet permit legal sports wagering markets. With nationwide legalization, sports betting market volume could easily double.

As the tax base grows, tax policy design becomes increasingly important. Rates should be low enough to pull participants out of black markets and into the legal, regulated markets.