Kansas Could Increase Tax Rate On Sports Betting
Kansas state officials recently met to discuss sports wagering and ways it can be improved. One suggestion is to increase the tax rate in the Sunflower State.
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Tax Increase Suggestion
This week, the Kansas Special Committee on Federal and State Affairs met to discuss sports wagering. In those discussions, one such suggestion that was brought up was increasing the state's tax rate on sports wagering. Currently, the tax rate is 10%.
Representative Francis Awerkamp views Kansas' tax policy as a failure, considering the state ranks among the lowest in the US for tax revenue per $1 million wagered, effectively arguing that Kansas isn't seeing a large enough return from its taxation plan. iDEA Growth's John Pappas disagreed, stating that the return, based on the size of the Kansas market, is a "success story."
According to the Kansas Legislative Research Department, in FY 2025, Kansas pulled in just over $17 million in tax revenues, or 6.5% of gross revenues. Only Arizona and Michigan had lower rates at 6.1% and 3.1%, respectively.
Population Issue?
As Pappas suggested, this relatively low amount comes down to the size of Kansas's market. With three million citizens, the population of Kansas ranks 35th in the US. Comparatively, it's about the size of Iowa and Arkansas.
| State | Population* | Handle | Tax Rate | Tex Revenues |
|---|---|---|---|---|
| Iowa | 3.24 | $2.85 Billion | 6.75% | $14.92 Million |
| Arkansas | 3.08 | $610.9 Million | 20% | $8.03 Million |
| Kansas | 2.97 | $2.70 Billion | 10% | $17.08 Million |
*Population millions. Handle and tax data for FY 2025.
Pappas's population theory checks out. Kansas has an active betting population generating $2.7 billion in handle through FY 2025, which is similar to Iowa's $2.85 billion. Tax revenues were higher in Kansas thanks to a slightly higher tax rate.
So, More Taxes Then?
Is the answer more taxes then? Of course, increasing the tax rate should increase the return. The Sports Betting Alliance warned Kansas officials that higher taxes impact books and bettors negatively.
By increasing the operating cost of books through higher taxes, there is a risk that promotions are cut and that odds worsen, pushing bettors away from licensed books to ones that don't pay state taxes.
They also have to be mindful of pushing players to different markets with lower tax rates.
The Missouri Problem
By the end of the calendar year, Missouri's sports betting industry will go live with a 10% tax rate. Thousands of Missourians currently crossing the border to bet legally in Kansas will no longer do so.
Why increase that exodus by pushing the tax rate in Kansas higher than that in Missouri?
The Future of Kansas Sports Betting
Kansas is at a crossroads with sports wagering. The state's five-year contract with operators is set to end in September 2027. Thanks to SB 125, the state lost the ability to negotiate, extend, or renew contracts with the six sports wagering operators: DraftKings, FanDuel, Fanatics, ESPN Bet, Bet MGM, and Caesars.
What this means for the future of the Kansas sports betting market is unclear. Will the legislature eventually allow the state to renegotiate these contracts, or will it let this market die?
There are hints that Kansas could become a single-operator market. Currently, only Delaware and New Hampshire are true single-operator markets. DC, technically, only has one mobile operator; others legally operate in designated retail areas such as sports arenas.
