US Sports Betting Debate: 10% Tax Would Raise $182B

Sports betting in the United States has hit the refresh button in the last few years, more exactly, since the Supreme Court cleared the way for states to legalize it in 2018. 

The industry that initially kicked off at $7 billion gradually grew to a whopping $167 billion by last year, largely driven by mobile apps, which no longer limit betting to casinos or sportsbooks. 

Today, almost every wager is placed online, making it easier and faster for people to take part. Those states that currently allow sports betting have witnessed clear financial perks, with tax revenue, used as strong public budget support, climbing steadily. 

At the same time, the federal government only collects a small share, with a long-standing tax of 0.25% applied to each wager. 

The rate has not flinched in decades, with growing discussion in Washington about whether this should change. 

5% Tax Would Trigger $100B Over 10 Years 

Some analysts suggest the tax should be raised to 5%, which would, according to recent estimates, bring in close to $100 billion over the next decade. 

A higher rate, such as 10%, could generate even $182 billion from FY2027-2036, while cutting the number of placed bets by 10%. 

The revenue would suffice to turn the sports betting tax into the second-largest federal excise tax, behind the gas tax.

The Fixed-Dollar Tax Proposal

Beyond the 5% or 10% tax options, the Budget Lab “also modeled a more modest, fixed-dollar tax on sports bets: $0.05 per transaction.”

The respective model claims it would “raise a much smaller amount of revenue, only $1.3 billion from FY2027-2036, than the 5% ad valorem tax, but in the long run its impact could be greater by reducing the number of bets.”

Meanwhile, supporters say sports betting should be treated like other taxed activities, such as the sale of alcohol or tobacco, with a higher level bringing in meaningful revenue and possibly slowing down excessive gambling. 

There are also concerns about the wider impact of betting, including financial stress for some users and the growing presence of gambling in sports culture.

Critics, however, warn that higher taxes could push people toward unregulated markets. Offshore websites and informal betting networks already exist, and stricter rules could make them more attractive. 

There is also concern from states that depend on betting revenue, as a drop in activity could affect their income.

Another recent change has already caught the attention of bettors. Starting in 2026, gamblers can no longer fully offset their losses against their winnings when calculating taxes. This means some people may owe taxes even if they break even overall.

For now, lawmakers are weighing their options. The sports betting industry continues to grow, but the question is how it should be taxed and regulated in the years ahead.