TLDR
- State legislators in North Carolina are exploring an increase to the sports betting tax from its current 18% to a range of 20%-30% as part of budget discussions.
- Since online sports wagering became legal in March 2024, North Carolina has collected more than $287 million in tax revenues.
- A nationwide trend is emerging, with Massachusetts proposing to increase its tax from 20% to 51%, joining other states hiking rates.
- Industry groups like the Sports Betting Alliance are campaigning against increases, warning consumers about reduced promotions and less favorable odds.
- Federally-regulated prediction markets such as Kalshi are expanding rapidly and remain outside state tax frameworks, offering operators strategic alternatives.
State legislators in North Carolina are actively discussing whether to increase the tax imposed on sports betting operators. The rate currently stands at 18%, but ongoing budget negotiations have put forward proposals ranging from 20% to as high as 30%.
Online sports wagering became legal across North Carolina in March 2024. In the months since launch, the state has accumulated over $287 million in tax collections from operator revenue.
Financial projections suggest that if a 30% tax rate had been implemented from day one, North Carolina would have generated an additional $200 million. Such projections make it difficult for budget-conscious legislators to dismiss the proposal, particularly amid fiscal constraints.
During the previous legislative session, the state Senate passed a measure that would have doubled the tax to 36%. However, the House rejected the proposal, and negotiations collapsed.
Now the discussion has resurfaced. State officials are working to secure funding for teacher salary increases and state worker compensation adjustments while simultaneously accommodating previously scheduled reductions to income taxes.
A National Pattern Emerges
North Carolina’s deliberations mirror actions taken across multiple states that view sports betting as a solution to revenue shortfalls. Numerous jurisdictions have either enacted or proposed tax increases on wagering operations.
Illinois implemented a tiered tax system that includes a per-wager charge. The first 20 million online wagers are taxed at 25 cents each, with the fee jumping to 50 cents thereafter.
This policy change has already reshaped the market. DraftKings revealed plans to shutter brick-and-mortar betting facilities, including its prominent location at Wrigley Field, attributing the decision to financially untenable operating conditions.
New Jersey elevated its online sports betting tax to 19.75%. Meanwhile, Massachusetts lawmakers are weighing legislation that would dramatically increase the state’s rate from 20% to 51%.
Should Massachusetts proceed, it would join New York and Rhode Island among states with the highest tax rates. Maryland and Louisiana have also crossed the 20% threshold, imposing rates of 20% and 21.5% respectively.
Operators Launch Public Opposition Efforts
The Sports Betting Alliance—representing major platforms including DraftKings, FanDuel, BetMGM, bet365, and Fanatics—has initiated digital outreach and text message campaigns targeting bettors directly.
The coalition encourages users to voice opposition to what it characterizes as an excessive tax increase that “punishes fans who are just playing by the rules.”
The position taken by operators is clear. When tax obligations increase, companies indicate they will respond by eliminating promotional offers, scaling back bonus incentives, and adjusting odds structures to preserve profitability.
Industry representatives also caution that escalating costs may drive recreational bettors toward illegal offshore platforms. These unregulated sites operate outside state tax systems and can consequently provide more competitive pricing.
Concurrently, prediction markets have emerged as a significant factor. Companies like Kalshi have experienced substantial growth in trading volume, with sports-related contracts accounting for 70% to 90% of their overall activity.
Unlike traditional sportsbooks, these platforms operate under federal oversight from the CFTC rather than state gaming regulators. This regulatory structure allows them to circumvent state-level taxation applicable to conventional sports betting.
Both FanDuel and DraftKings have begun expanding into prediction market offerings. These contracts function as customer acquisition mechanisms, particularly valuable in jurisdictions where conventional sports wagering faces stringent regulation.
Should states persist in raising taxes on traditional sportsbooks, operators may increasingly pivot toward federally regulated alternatives that impose lighter tax obligations.
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