The Winning Sports Betting Tax & Regulatory Game Plan

The most successful states that have legalized sports betting have a competitive, low-tax environment with focused regulation that puts integrity first – rather than using regulations to handicap certain companies or provide giveaways to sports leagues.

New Jersey was the first state to legalize sports wagering following the U.S. Supreme Court’s overturning of the Professional and Amateur Sports Protection Act (PASPA). With modest tax rates and regulations, in 2021, New Jersey sportsbooks became the first to take more than $10 billion in bets. While state tax revenue reached $102.6 million, up from $50.8 million in 2020.

The strongest, most sustainable markets follow conservative, free market principles:

Low tax rates that allow the industry to succeed, creating jobs and economic growth.

  • Iowa’s 6.75% tax rate on bets is the lowest instituted by a state post-PASPA.
  • Indiana, New Jersey, and Ohio serve as other good examples on tax rates.
  • High tax rates can force thin-margined sports books to modify odds, and reduce betting activity in legal markets. This distorts markets and keeps activity in illegal black markets.

Statewide digital sports betting.

  • In the digital age, online app-based sports betting should be legalized as traditional sports books are legalized.
  • With advanced geo-location capabilities, and identity verification, it is not necessary to require on-site registration.

Numerous, affordable licenses available.

  • States should ensure a competitive market by offering many licenses and restricting market access on the basis of integrity and ability to effectively provide a reliable product. This appropriately allows the consumer to determine which providers succeed, not the government.
  • Some states have pushed through absurd licensing fees, like Pennsylvania, which legalized with a $10 million licensing fee.

No rent-seeking gimmicks like “integrity fees”, or statistics data mandates.

  • Sports stats are public information, this has already been determined in court.
  • The market will hold any sports book responsible very quickly if they used inaccurate, or delayed statistics.
  • “Integrity fees” have been soundly rejected by multiple states because they are simply a tax on sports books that goes directly to a private cartel in sports leagues.
  • Lawmakers should remain vigilant against renamed or slightly modified versions of these bad ideas.

Caps on advertising & geographic bans on college sports betting only help the black market.

  • To combat the illegal, offshore gambling market (that can end up providing funding to shady outfits), legal operators should be allowed to take bets on college sports – for both in- and out-of-state schools.
  • Government should avoid caps on advertising. It is important legal sportsbooks can advertise their products so consumers are aware of the legal, regulated options they have, and are not confused as to which products are licensed by the state and which are unregulated.

A Winning State Example:

  • Iowa’s sports betting legalization bill is SF 617 (2019).
  • The legislation includes the most competitive tax rate among U.S. states at 6.75%, the same as Nevada.
  • The bill legalized digital betting statewide.
  • Licensing fees are modest, more like an actual fee than a tax by another name.
  • Regulations and licensing rules are focused on integrity.