Maryland Could Join Trend Of Increasing Tax Rates On Sports Gambling Operators

Facing a massive budget deficit of $3 billion, Maryland is exploring new ways to close that financial shortfall on their books. One option put on the table is to double the state's current tax rate on iGaming from 15% to 30% and to raise the tax rate on table games from 20% to 25%. 

Maryland Governor Wes Moore said this change could increase tax revenues by $95.4 million. In 2024, Maryland collected $82.3 million in taxes from operators, a massive jump from 2023 when it collected $36.5 million in tax revenues.

Moore isn't the first Governor who has increased taxes on gaming and sports gambling operators to help curb budget deficits. Nor will he be the last.

Raising Taxes: Emerging Trends

Now that sports gambling has passed the initial legalization phase in 38 states (and D.C.) and Missouri soon making it 39 states, many of those states are taking a closer look at the vast sums of money pouring into operators and looking to get a bigger piece of the pie with increased taxes.

Effective June 1, 2024, Illinois increased taxes on sports betting operators from a flat 15% to a sliding scale that starts at 20% and works up to 40%, depending on the operator's gross annual revenue. Only those making $200 million or more would see a 40% tax rate.

That new 40% tax rate made the Land of Lincoln the second-highest taxed state for sports gambling in the nation behind the 51% charged by New York, New Hampshire, and Rhode Island. The increased tax rate hasn't slowed down business either with bet365 jumping into Illinois's billion-dollar market, and it's bringing in a lot more tax revenues averaging $15.8 million monthly from January to August 2024 to $37.9 million monthly from September to November. 

In 2023, Ohio increased its tax rate from 10% to 20%. Some believed this would hurt the Ohio market as surrounding states like Indiana and Kentucky had much lower rates, but 2024 still saw books bring in $727 million in gross annual revenue in the Buckeye State.

States with relatively low rates

With Illinois and Ohio leading the way more and more states are looking to sports gambling revenues to fill holes in their budgets like Maryland is proposing for the 2026 fiscal year. So who's next on deck?

Outside of Maryland, New Jersey could very well be next with State Senator John McKeon effectively tabling some FOMO legislation saying New Jersey's tax rate is "not commensurate with where everybody else is". Sports gambling revenues are currently taxed at 13% in the Garden State but McKeon's Bill 3064 would push that tax rate to 30%.

Change is occurring typically within states with rates below 20%. At the time of writing, there are 20 states whose tax rate is below 20% with Tennessee being the lowest at 1.85%, though that rate is applied on handle and not on gross revenues. Here's a list of those states and their tax rates at the time of writing; how many of these will change by this time next year?