Surprise State Leads in Sports Betting Tax Revenue

Since the ban on sports betting was lifted in 2018, 38 U.S. states now offer legalized sports betting, and the taxes each state made on betting are in.

In 2023, New Jersey had the most amount of money wagered — also known as “handle” — at $51.1 billion, followed by New York at $45.3 billion and Nevada at $41.8 billion. But only two of those states were among the top three in tax revenue from sports wagering. That’s because some states take a much bigger cut than others.

This chart shows the states that collected the most in taxes from sports-betting revenue in 2023:These are the taxes collected on the revenue earned by operators that offer various forms of in-person and online betting in a given state, such as DraftKings

New York’s estimated $2 billion in tax revenue is the highest of any state and is over three times that of Pennsylvania, which comes in at No. 2.

New York’s tax revenue from betting is so much higher than other states — despite seeing a similar amount of money wagered — because its tax rate is higher.

New York’s sports betting tax rate is 51%. New Hampshire and Rhode Island also have 51% tax rates, but they see much less money wagered. Most other states where betting is legalized levy taxes on betting revenue of between 6% and 20%.

“Big markets have all the leverage,” Sam McQuillan, betting analyst for LegalSportsReport, told MarketWatch. “Sportsbooks spent $170 million to get just 18% of the ballot vote in California. … How much tax are they willing to pay when it actually becomes legal?”

Ohio Gov. Mike DeWine led a charge to increase his state’s tax on sports-betting revenue this year to 20%, up from the 10% approved in 2021. Some New Jersey legislators have proposed raising tax rates on betting revenue to 30% from 13%.

While the federal ban on sports betting was struck down in 2018 by the Supreme Court, it’s up to individual states to create their own legislation on sports betting. According to the AGA, 38 states as well as Washington, D.C., offer some form of sports betting.

Americans wagered $31.75 billion on sports in the second quarter of 2024. That generated $3.16 billion in quarterly revenue, which is up 35.3% year over year.

Sports-betting tax-revenue figures for 2024 will be available sometime in 2025, but early indications are that the states seeing the most dollars wagered in 2024 are mostly the same as in past years. They include New York, New Jersey, Illinois, Pennsylvania, Ohio and Nevada.

In an effort to offset the high tax rates it must pay, DraftKings announced in August that it wanted to debut a gaming-tax surcharge on winning bets in states with high taxes on sports-betting revenue, such as New York, Illinois, Pennsylvania and Vermont. But the company later scrapped the plan, citing negative feedback.

“We always listen to our customers, and after hearing the feedback we have decided not to move forward with the gaming-tax surcharge. We are always committed to delivering the best value in the industry to our loyal customers,” DraftKings told MarketWatch.

DraftKings and FanDuel are the two biggest sportsbook operators in the U.S. and together had nearly a 75% share of the sports-betting market last quarter.