Massachusetts Lawmaker Proposes Significant Increase in Taxes on Sports Betting
Revised Article:
Senator John Keenan of Massachusetts recently proposed a state budget amendment that threatens to escalate the state's online sports betting tax rate from 20% to a whopping 51%.
Keenan's eyebrow-raising proposal, amid the sea of proposed budget amendments, could cause a seismic shift in the state's current sports betting market, aligning Massachusetts with the sky-high 51% tax rate of sports betting in New York. The relentless New York tax rate is the highest in the nation.
This tax hike only adds fuel to the fire between Massachusetts regulators, lawmakers, and the state's betting operators. Earlier this week, the operators walked out of a roundtable discussion organized by the Massachusetts Gaming Commission regarding sports betting limitations, infuriating commissioners.
Undoubtedly, the adoption of this tax boost would rub salt in the wounds of Massachusetts sports betting operators. It wouldn’t be implausible for some of these operators to seriously consider bailing out of the state due to such a drastic change in financial feasibility.
A Persistent Pattern
The Massachusetts legislature isn't the first to mull a boost in their state's respective sports betting tax rate.
In Ohio, the sports betting tax rate doubled from 10% to 20% last year, sparking some operator frustration. Despite this, legal sports betting emerged in Ohio as early as the beginning of 2023.
Similarly, New Jersey and Illinois each harbor proposals to increase their respective sports betting tax rates.
A bill in New Jersey aims to jack up the state's online sports betting tax from the current 13% to a formidable 30%. Meanwhile, Illinois' Governor's budget proposal seeks to push the sports betting tax rate from 15% to a troubling 35%. This move received strong opposition from the Sports Betting Alliance, a coalition consisting of BetMGM, DraftKings, Fanatics Sportsbook, and FanDuel.
The Sports Betting Alliance dedicates an entire webpage to arguing against the Illinois proposal, urging bettors to reach out to their state representatives to voice opposition to the tax hike. The alliance contends that a sudden spike in taxes would lead to inferior odds and fewer promotions for the state's sports bettors.
Although it remains unclear whether any of these three states will manage to push through tax increases, one thing is clear: state lawmakers seem to be developing an appetite for boosting their potential sports betting tax revenue gains.
Enrichment Insights
- Illinois has imposed an additional per-wager tax of 25 cents on the initial 20 million bets and 50 cents on any wagers beyond that annually. This is a volume-based tax, which is quite rare in comparison to the usual percentage-of-revenue models[1][3].
- Faced with increasing tax rates, some operators like FanDuel have added a 50-cent transaction fee on every online wager in Illinois, effectively shifting the increased tax cost onto consumers[1].
- DraftKings has publicly announced its intention to make adjustments in response to these tax increases, signaling potential changes in pricing, promotions, or market participation[1].
- Experts warn that Illinois’ volume-based tax could force operators like FanDuel to reevaluate their business models because it penalizes high-volume betting, traditionally a profit driver[3].
- If approved, the Illinois per-bet tax could cost FanDuel over $75 million in additional costs annually, potentially destabilizing the market[3].
- The sports betting tax rate in Illinois is proposed to increase from 15% to 35%, a move that has received strong opposition from the Sports Betting Alliance.
- Undeterred, state lawmakers seem to be developing an appetite for boosting their potential sports betting tax revenue gains, like the proposal in Illinois to implement a volume-based tax on sports betting.
- This volume-based tax imposes a 25 cent per-wager tax on the initial 20 million bets and 50 cents on any wagers beyond that annually.
- The Sports Betting Alliance argues that such a tax hike could lead to inferior odds and fewer promotions for sports bettors, potentially shifting the increased tax cost onto consumers, as demonstrated by FanDuel's addition of a 50-cent transaction fee on every online wager in Illinois.
