North Carolina Tax Talks Highlight Growing Pressure on Sports Betting Operators

North Carolina lawmakers are discussing a potential increase to the state’s sports betting tax rate, making the state the latest jurisdiction to look into gambling taxes as a new revenue source amid growing budget pressures.

The discussions revive a debate from last year. Then, the Senate approved a budget proposal that would double the current 18% tax on sports betting revenue to 36%, while the House backed a budget without the increase. The two chambers ultimately failed to reach a compromise.

Lawmakers Discuss 20%-30% Rate

According to local reporting by WRAL, lawmakers have discussed increasing the current tax on sports betting operators to a rate between 20% and 30%.

The discussions come as North Carolina lawmakers negotiate the state budget. That includes planned raises for state employees and teachers, while also navigating scheduled income tax reductions.

Lawmakers have reportedly also discussed additional taxes on lottery sales and even individual sports bets, similar to Illinois’ model. WRAL noted those proposals could face “logistical challenges and opposition from bettors.”

North Carolina launched legal online sports betting in March 2024 with an 18% tax on gross wagering revenue. Since launch, operators have reportedly paid more than $287 million in taxes.

WRAL reported that had the state initially adopted a 30% rate, North Carolina would have collected nearly $200 million in additional tax revenue.

States Increasingly Target Gambling Taxes

While no formal legislation has been introduced, the discussions highlight a growing national trend in which lawmakers increasingly view sports betting and iGaming as politically easier targets for tax increases than broader taxes such as income or property taxes.

Last year, Illinois adopted a controversial per-bet tax structure on sportsbooks, which added a per-bet fee on top of existing sportsbook revenue taxes.

Meanwhile, New Jersey increased online sports wagering tax and iGaming tax to 19.75% from 13% and 15%, respectively. Maryland and Louisiana raised their 15% sports betting tax to 20% and 21.5%, respectively.

Elsewhere, Ohio Governor Mike DeWine proposed doubling the online sports betting tax from 20% to 40%. However, lawmakers rejected the proposal. Indiana lawmakers also discussed potential tax-related changes tied to sports betting.

This year, more jurisdictions have seen similar proposals.

Governors in several states, including those in Arizona, Illinois, and Michigan, have proposed raising gambling taxes in their budget plans.

An active Massachusetts bill proposes raising the sports betting tax from 20% to 51%. That would match the highest rates in the country. Earlier this year, West Virginia lawmakers proposed increasing the sports betting and iGaming taxes from 10% to 25%.

Elsewhere, Vermont lawmakers also floated a per-bet tax proposal, while Chicago separately moved forward with a city-level tax on sportsbooks.

Industry Warns of Market Consequences

As expected, the potential increase has drawn opposition from sportsbook operators and industry groups.

The Sports Betting Alliance, which represents major operators including DraftKings, FanDuel, BetMGM, bet365, and Fanatics, reportedly launched a campaign urging customers to contact lawmakers to oppose potential tax hikes. In a text-message campaign, the group said:

Right now, some lawmakers in Raleigh are pushing for a massage tax hike on legal sports wagering that punishes fans who are just playing by the rules.”

According to WRAL, the group argued that higher taxes could ultimately be passed down to consumers through reduced promotions, worse odds, or other pricing changes.

The debate mirrors arguments repeatedly raised in other states that increased taxes could make regulated sportsbooks less competitive against offshore operators and unlicensed betting markets.

At the same time, lawmakers increasingly appear willing to test how much additional taxation the sector can absorb.

Prediction Markets Add New Pressure to State Models

The growing trend of sportsbook tax proposals also comes as the industry navigates the rapid emergence of prediction markets and sports event contracts.

Prediction market operators like Kalshi are seeing a substantial trading volume on sports. Super Bowl trades topped $500 million, while in April, total volume was almost $15 billion. The company says about 70% of its volume is sports-event contracts, while media often cite 85% to 90%.

Leading operators such as FanDuel and DraftKings have said in recent earnings calls that prediction markets currently show limited cannibalization of traditional sportsbook revenue. Still, both companies have also entered the emerging sector.

Both operators have increasingly framed sports-event contracts as customer-acquisition and market-access tools in states where they do not operate licensed sportsbooks.

The combination of expanding market access opportunities and growing pressure on sportsbook margins from higher taxes could further incentivize operators to explore alternative products and regulatory frameworks tied to prediction markets and event contracts.

Unlike traditional sportsbooks, federally regulated prediction markets currently operate outside state sportsbook tax structures in many jurisdictions.

That dynamic could create additional tension between state lawmakers seeking higher gambling tax revenue to fill budget gaps and operators increasingly leaning toward federally regulated prediction markets that are not subject to state sportsbook licensing frameworks.