US Sports Betting Tax Rates by State: Nominal vs. Effective

The majority of states now have legal online sports betting markets, but they have seen varying levels of success. Some of that can be attributed to factors such as legal markets and the number of operators, but one of the most significant differences lies in the sports betting tax rate.

While it's easy to locate the nominal tax rate for all legal US online sports betting markets, that number can be deceiving. That’s because it doesn’t factor in operator deductions, which vary by state. As a result, states with the same nominal rate and overall revenue numbers often generate different levels of tax revenue.

State lawmakers have begun to realize this key difference, leading many states to enact significant tax reform over the last few years. Some have opted to simply raise the nominal rate, but have run into fierce opposition from the industry. Others have found greater success by adjusting rules governing deductions to increase tax revenue without a true tax hike.

Below, we’ll share the nominal vs. effective tax rate for each of the country’s legal sports betting markets. We’ll also provide the latest updates on proposed tax hikes along with the impact of the One Big Beautiful Bill Act.

Now that we have an understanding of nominal vs. effective tax rate, it’s time to dive into the different approaches states take to taxing regulated sportsbooks. Below are some of the most significant markets representing very different tax systems.

Colorado

The Centennial State has become a cautionary tale when it comes to taxing regulated sportsbooks. When it launched the market in 2020, the state set a low rate of 10% and allowed operators to deduct promo bets. While the market saw impressive volume, the state hasn’t seen the tax revenue it hoped.

Lawmakers have failed to raise the Colorado sports betting tax rate, but did successfully pass HB25-1311 last year, ending promo deductions starting on July 1, 2026.

Illinois

Two years ago, Illinois moved to a graduated tax rate where sportsbooks were taxed based on their revenue. Less than one year later, lawmakers approved a new per-wager tax, which required sportsbooks to pay a fee on each wager it processed. As a result, the state’s sportsbook operators had to enact changes of their own to offset them, including per-wager fees and higher minimum bet requirements.

These changes have resulted in the overall handle in Illinois dropping significantly. However, revenue numbers have remained strong. That’s because remaining active bettors are placing larger wagers, making up for the drop in overall handle.

New York

The Empire State remains the largest sports betting market in the US, despite an industry-high 51% tax rate. Operators have been willing to pay the high price for access to the country’s most valuable market, which has residents and visitors from all over the world.

There are a few other states with tax rates of 50%+, but they do not come close to matching the handle New York sees on a monthly basis. As a result, they face strong pushback from the industry, which has largely accepted the high costs to enter the New York market.

North Carolina

The Tar Heel State recently raised its sports betting tax rate from 18% to 23%  on July 1, 2026. The state has seen a lot of success from sports betting, but believed its tax requirements were leaving revenue on the table. The state hopes the change will bring in more money from the industry without increasing costs for bettors.

North Carolina lawmakers had considered far larger tax hikes, including doubling the rate to 36%. However, fears over how the industry would respond led them to agree on a 5% hike instead.

Pennsylvania

Like Colorado, Pennsylvania chose to allow sportsbook operators to deduct promo bets and carry over net operating losses. This leads to an effective sports betting tax rate that is about 12% lower than the nominal 36%. This led operators to accept a higher rate, knowing the deductions would lead to a more manageable rate of around 24%.

The difference between Colorado and Pennsylvania is the nominal rate, which the former set far too low. Industry pressure has made it difficult for states to raise those rates, leaving markets like Colorado to make changes to deductions.

In July 2025, President Trump signed off on the One Big Beautiful Bill Act (OBBBA), which could have a massive impact for sports bettors.

One of the biggest changes from the bill is a 90% cap on gambling losses for federal tax returns. This means that when calculating gambling winnings in a single year, 10% of your losses cannot be included. It will result in higher tax bills for many active and big-money bettors, leaving the industry and betting states to wonder what the long-term impact will be.

While the majority of bettors won’t be affected by OBBBA’s changes, big-money bettors and sharps will. The fear is those bettors will leave the regulated industry, believing the cap would make it difficult to win money over the long term. If that happens, it would lead to a drop in tax dollars in betting states.

Several prominent lawmakers, led by Nevada US Rep. Dina Titus, are trying to reverse the bill’s 90% cap. While the effort has support, it will face an uphill battle to undo the controversial change.

When creating this list, we spent hours poring over reliable data from sports betting regulators and state agencies around the US. We reviewed relevant sports betting legislation around sports betting tax rates, state-created monthly revenue reports, press releases, and articles from reliable financial reporting sources such as the Wall Street Journal and Bloomberg.

When calculating the effective tax rate, we took a state’s tax revenue collected from sports betting and divided it by the gross gaming revenue for the same time period. The federal excise tax was not included.

We used full-year 2025 data from states where it was available when calculating the effective tax rate. For states that were not active for all of 2025, we used all available data since its launch. When determining the effective rate for states that changed their systems in 2025, we used data taken from after the change went into effect.