Why 2027 Could See a New Wave of Tax Hikes for Sportsbooks

As regulated sports betting looks to say goodbye to sports prediction markets in 2027, operators may pay a price.

The US Supreme Court has been asked to weigh in on the legality of sports prediction markets and who has the authority to regulate them. Recent lower-court rulings have trended against the emerging industry, leading many to expect platforms to be forced into sports betting markets across the US. 

While a favorable ruling would help the industry, could it also lead to a spike in US sports betting tax rates?

States Kept in Check

Unlike regulated sportsbooks, prediction platforms aren’t required to pay taxes on their sports contracts. Operators also aren’t bound by gambling laws, allowing the industry to operate in all 50 states. This has forced states to act and has created tensions with several top sportsbooks.

Over the last year, DraftKings, Fanatics, and FanDuel have launched their own prediction platforms. They have begun offering sports markets wherever their sportsbook isn’t available, reaching sports bettors in every state. 

As more sportsbooks discuss pursuing their own prediction platforms, states are under pressure to keep them happy. The fear is that operators will pull out their sportsbooks in favor of prediction markets, delivering a devastating blow to state tax revenue. As a result, several markets have held off on tax hikes and new regulations.

Ruling Could End Sports Markets

If the US Supreme Court rules that states can enforce gambling laws on sports markets, it would be a death blow for sports prediction markets. Operators would need to be licensed and taxed to join state sports betting markets, where they would be left fighting for scraps of market share.

Sportsbooks that launch prediction platforms would be in the most trouble, since the markets would be legal only in states where their sportsbooks already operate. This could cause significant financial losses and hurt their ability to secure sportsbook licenses in new markets. 

Prediction-only platforms offering a wide range of markets could continue operating. However, sports markets make up the vast majority of their revenue. This would be a devastating blow to operators like Kalshi, who have spent a fortune on legal fees and celebrity endorsements.

States Have Discussed Tax Hikes

Amid the fight over sports prediction markets, state lawmakers have been considering bills to raise taxes and other costs for sportsbooks. While those efforts failed in 2026, the potential removal of sports markets could see them return with more support in 2027.

One of the few states to hike taxes this year was North Carolina. It passed a bill raising the rate from 18% to 23%, but several prominent lawmakers pushed for larger increases. They have promised to fight for another hike in 2027, especially if sports markets are shut down.

Some states have also considered enacting a tax system similar to Illinois's, which uses a tiered system based on revenue and also assesses a small tax on each wager accepted. Michigan Governor Gretchen Whitmer has fought to adopt the per-wager tax and has promised to continue until she leaves office in January.