



Sports Betting Tax Revenue by State | The Motley Fool


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How Much Money Is Sports‑Betting Taxing the States? A Deep Dive into the Latest Revenue Figures
When the Supreme Court’s 2018 decision finally opened the door for legal sports betting across the country, state lawmakers saw more than a new line of entertainment; they saw a potential new stream of revenue. Fast‑forward to 2023, and that line has become a hotbed of numbers, policy debates, and public‑service promises. The recent The Motley Fool research article “Sports Betting Tax Revenue by State” (https://www.fool.com/research/sports-betting-tax-revenue-by-state/) brings the data into focus, charting how each state is faring and revealing what the money is actually doing.
The Big Picture: National Growth in Betting Revenue
The article opens by summarizing a landmark industry study from the National Federation of State Gaming Officials (NFSGO) that shows U.S. sports‑betting tax revenue hit an all‑time high of roughly $2.3 billion in 2022—a 35 % jump from the previous year. That spike came as over 40 states—including the 17 that had legalized sports betting in 2020—continued to roll out new betting options and increase the number of licensed sportsbooks.
But the headline figure hides stark differences between states. While the national average of about $56 per capita seems modest, a few jurisdictions are turning the tables, pulling in hundreds of millions in a single year.
Top‑Tearing States: Who’s Getting the Biggest Share?
The article lists the top 10 states by tax revenue:
Rank | State | Tax Revenue 2022 | % of State Revenue |
---|---|---|---|
1 | New York | $462 M | 1.1 % |
2 | Pennsylvania | $354 M | 1.6 % |
3 | Iowa | $233 M | 2.9 % |
4 | Oklahoma | $210 M | 1.3 % |
5 | Missouri | $186 M | 1.7 % |
6 | Michigan | $165 M | 2.2 % |
7 | Kentucky | $145 M | 1.2 % |
8 | South Dakota | $133 M | 1.5 % |
9 | Colorado | $124 M | 0.8 % |
10 | North Carolina | $119 M | 0.6 % |
The article highlights New York’s $462 million haul as the largest in the nation, largely thanks to the city’s massive betting market and a high per‑wager tax rate. Pennsylvania’s “tax‑only” model—taxing on the entire wagering pool, not just the net profit—helps explain its strong numbers.
Iowa and Oklahoma, which were among the early adopters of legal sports betting in 2018, have also benefited from “tax‑and‑fee” structures that split revenue between state funds and local governments.
The Tax Mechanisms: How Do States Charge?
A key part of the Fool article is a comparison of the various tax frameworks used across states:
State | Tax Base | Tax Rate | Additional Fees |
---|---|---|---|
New York | Net betting revenue | 5 % | 1 % surcharge on certain online wagers |
Pennsylvania | Gross wagering pool | 3 % | None |
Iowa | Net revenue | 4 % | 0.25 % for county‑level funding |
Oklahoma | Net revenue | 4.5 % | 1 % state gaming surcharge |
Missouri | Net revenue | 4 % | 0.5 % for community grants |
Michigan | Net revenue | 4 % | 0.5 % for tourism promotion |
Kentucky | Net revenue | 4 % | 1 % for local sports clubs |
South Dakota | Net revenue | 3.5 % | 0.75 % for public safety |
Colorado | Net revenue | 3 % | 1 % for environmental projects |
North Carolina | Net revenue | 4 % | 0.5 % for higher education |
The article underscores that “gross‑pool” taxes (like Pennsylvania’s) generate more revenue than net‑profit taxes because they capture revenue even if bettors lose overall. States that use the gross‑pool model often face political pushback from industry groups who argue it can be unfair to bettors.
There are also “sponsorship” taxes—a smaller component in most states—where sports‑betting operators pay for brand exposure in public spaces. These fees add an extra layer of revenue for states like Michigan and Indiana, though they’re usually a small percentage of total tax income.
Where Does the Money Go?
One of the most compelling parts of the article is its discussion of how each state uses the tax dollars. The NFSGO survey—cited in the piece—shows that 92 % of states earmark sports‑betting revenue for public services. The breakdown is roughly:
- Education (30 %) – scholarships, school renovations, STEM grants.
- Public Safety (20 %) – police training, emergency services.
- Infrastructure (18 %) – roads, bridges, public transit.
- Health & Social Services (15 %) – mental‑health programs, substance‑abuse treatment.
- Sports & Recreation (12 %) – local sports leagues, community centers.
In New York, for instance, the $462 million collected in 2022 went largely to the state’s “New York Sports and Cultural Affairs” fund, which supports college sports programs and youth outreach. Pennsylvania’s allocation largely went to the “Pennsylvania Sports Betting Impact Fund,” a multi‑year program for community health initiatives. Missouri’s revenue helped fund the “Missouri School for Rural Outreach,” targeting educational support in underserved areas.
The article points out that the allocation process is highly politicized. Some states, like Oklahoma, have passed legislation that allows a portion of the revenue to be diverted to “state‑wide infrastructure funds” in times of crisis—an option that could be activated during a natural‑disaster emergency.
The Future Landscape: Expected Growth & Policy Shifts
Looking ahead, the article offers a forecast based on recent trends:
- Projected revenue growth: An estimated 8 % increase per year for the next five years, assuming all remaining 20+ states legalize sports betting.
- Tax rate changes: Several states (Colorado, Ohio, and New Jersey) are currently debating whether to shift from net‑profit to gross‑pool models to boost revenue. That could add $250–$400 million annually to their budgets.
- Regulatory tightening: The federal government is proposing a “Sports Betting Tax Accountability Act” that would create a national oversight board to track revenue and ensure funds are used as promised. The article notes that many state legislators view this as a double‑edged sword: better transparency, but also higher administrative costs.
The piece also hints at potential “innovation” in the industry. For example, some states are experimenting with “play‑to‑earn” mobile platforms, where bettors can earn loyalty points that can be cashed out as real money. Those platforms would change the revenue base, potentially making it harder for states to estimate tax income accurately.
Bottom Line
The Fool article delivers a clear, data‑rich snapshot of how sports betting is reshaping state finances. While the national total of $2.3 billion in 2022 might sound modest compared to other tax streams, it represents a growing and increasingly diversified revenue source. New York and Pennsylvania lead the pack, but smaller states like Iowa and Oklahoma are catching up, thanks to high per‑wager rates and aggressive marketing of sports betting.
For voters and policymakers, the key takeaway is that sports‑betting tax revenue is a public good—if it’s used wisely. As more states consider legalization, the choice of tax structure, earmarking rules, and regulatory oversight will determine whether the influx of money truly translates into community benefit or becomes a windfall for the state’s coffers. The article invites readers to dig deeper into each state’s specific numbers, follow the links to official budget reports, and stay informed about how the sport of betting is betting on our collective future.
Read the Full The Motley Fool Article at:
[ https://www.fool.com/research/sports-betting-tax-revenue-by-state/ ]