Since the Supreme Court’s groundbreaking decision in 2018 to expand sports betting beyond Nevada, states across the nation have been capitalizing on this new revenue stream. Several years into this venture, we can now see which states are reaping the most benefits from both in-person and online sports wagering.
The Washington Post recently delved into tax revenue data from various states to understand why some are outperforming others in the realm of sports betting. Pennsylvania and New Jersey, for instance, are leading the pack in the Northeast with impressive revenue figures since opening up their sports betting markets in 2018.
Last year, Pennsylvania collected $169.5 million in state taxes from sports gambling, averaging $16.36 per adult resident. New Jersey followed closely behind with $112.2 million in revenue, or $15.42 per adult. New York topped the charts with $861.9 million in tax revenue, averaging $55.43 per adult.
New Jersey has taken the lead in total wagers placed since the legalization of sports betting, with $51 billion to date. This is ahead of New York at $43 billion, Nevada at $41 billion, Illinois at $34 billion, and Pennsylvania at $30 billion.
What sets these high-earning states apart isn’t just the volume of bets placed but also their tax rates on online sports betting. For example, New York and Pennsylvania have some of the highest tax rates in the country, with New York imposing a 51% tax on gross revenue from online sports betting and Pennsylvania at 36%.
On the other hand, despite Nevada’s well-established gambling industry, the state generated $52.6 million in tax revenue last year due to comparatively lower tax rates for sports gambling, both in-person and online. Additionally, Nevada requires individuals to complete online sign-ups at local sportsbooks, hindering the ease of access compared to other states.
New Jersey, known for its lower tax rate on online sports betting at 13%, is considering an increase to 30% to capitalize further on its thriving market. Lawmakers in various states, inspired by the success of New York and Pennsylvania, are exploring similar strategies to boost revenue without burdening residents.
The online sports betting sector is experiencing remarkable growth, as evident in the significant tax revenue increases reported by various states. Pennsylvania, for instance, saw a 78.5% surge in online sports betting tax revenue from January 2023 to January 2024, outpacing other gaming categories.
Overall, the U.S. gambling industry achieved record revenue numbers in 2023, with sports betting contributing a significant portion to this growth. Despite the industry’s success, states earned around $2.5 billion from online sports betting last year, highlighting its untapped potential compared to other revenue sources.
With sports betting still in its infancy in terms of widespread participation, it remains to be seen if it will reach the same level of popularity as traditional forms of gambling like lotteries. Some states are optimistic about the future of sports betting and are adjusting their tax rates accordingly to maximize revenue.
As the landscape of sports betting continues to evolve, states are navigating the complexities of regulation, taxation, and market demand to find the right balance between profitability and accessibility for residents.