TLDR
- North Carolina lawmakers are debating raising the state’s sports betting tax rate from 18% to between 20% and 30% to help plug budget gaps.
- The state has generated over $287 million in tax revenue since launching legal online sports betting in March 2024.
- Other states are also hiking taxes on sportsbooks, with Massachusetts pushing a bill to raise its rate from 20% to 51%.
- The Sports Betting Alliance is running campaigns warning that higher taxes will hurt bettors through worse odds and fewer promotions.
- Prediction markets like Kalshi are growing fast and operate outside state sportsbook tax structures, giving operators a potential alternative.
North Carolina lawmakers are in active talks to raise the state’s tax rate on sports betting revenue. The current rate sits at 18%, but budget negotiators are considering a new rate somewhere between 20% and 30%.
The state launched legal online sports betting in March 2024. Since then, it has brought in more than $287 million in tax revenue.
Analysts estimate the state would have collected an extra $200 million if a 30% rate had been in place from the start. That kind of number is hard for lawmakers to walk away from, especially with budget pressures mounting.
Last year, the North Carolina Senate approved a proposal to double the tax to 36%. The House blocked it, and the effort stalled.
This year, the push is back. Lawmakers need to fund teacher raises and state employee pay increases while also managing scheduled income tax cuts.
Other States Are Making Similar Moves
North Carolina is not alone in looking at sportsbook revenue as a way to fill budget holes. Several other states have recently raised or proposed raising their own tax rates.
Illinois introduced a progressive tax structure along with a per-bet fee. The first 20 million internet bets carry a 25-cent fee, which doubles to 50 cents after that.
That move has already caused market disruption. DraftKings announced it would close physical retail locations, including its sportsbook at Wrigley Field, citing unsustainable costs.
New Jersey raised its online sports wagering tax to 19.75%. A bill in Massachusetts would push that state’s rate from 20% all the way to 51%.
If passed, Massachusetts would join New York and Rhode Island at the top of the tax scale. Maryland and Louisiana have already moved past the 20% mark, sitting at 20% and 21.5% respectively.
The Industry Responds With Public Campaigns
The Sports Betting Alliance, which represents DraftKings, FanDuel, BetMGM, bet365, and Fanatics, has launched digital and text campaigns aimed at bettors.
The group is urging users to push back against what it calls a “massive tax hike” that “punishes fans who are just playing by the rules.”
The industry argument is straightforward. If tax rates go up, operators say they will cut promotions, reduce bonus bets, and offer worse odds to protect their margins.
They also warn that higher costs could push casual bettors toward unregulated offshore sportsbooks. Those platforms don’t pay state taxes and can offer better pricing as a result.
Meanwhile, prediction markets have entered the picture. Platforms like Kalshi have seen trading volume surge, with sports-event contracts making up 70% to 90% of their business.
These platforms are regulated at the federal level by the CFTC, not by state gambling commissions. That means they largely avoid state sportsbook tax structures.
FanDuel and DraftKings have both moved to enter the prediction market space. These contracts serve as customer acquisition tools, especially in states where traditional sports betting faces heavy regulation.
As states continue to raise taxes on sportsbooks, operators may increasingly shift toward federally regulated products that carry lower tax burdens.
