When the levy breaks: The past, present and future of gambling taxation in the US

You don’t have to be in the industry or even a gambler to recognise Las Vegas as the indisputable epicentre of modern gambling in the Western world. Indeed, while the practice was contained in the US almost exclusively to the state of Nevada for much of the 20th century, the US industry has now proliferated into a near-$72bn entity – according to the American Gaming Association’s (AGA) revenue statistics from 2024.  

While it is a one Christopher Colombus who is largely credited with the introduction of gambling to the Americas in 1492 – it was the British colonisers who pushed the practice to the fore in North America. However, during the centuries in which the country was at war with itself, the ‘fore’ failed to really extend past local casinos, saloons, riverboats and betting booths. Further, even though the American Revolutionary War in 1776 was partially financed by the sale of lottery tickets, the US’ initial approach to gambling as an independent nation was extremely tentative. A pendulum of indecisive legislation continued to swing back and forth for almost 150 years following independence until, in 1931, the Wide Open Gambling Bill was passed in Nevada – opening the floodgates for wagering in the state.  

This, as they say, is where it all began – and a lot has changed in the time following regulated gambling’s humble beginnings in the US. Namely, tax.  

Taxation in the nation 

Indeed, specified as part of the Wide Open Gambling Bill in 1931 was a monthly unit-based tax structure that imposed a $25 tax per table, $10 tax per slot machine and $50 tax for any other casino games. Nowadays the industry has taken on a completely different form – and changing with it is the shape of taxation.  

Currently, gambling in Nevada is taxed largely at a blanket rate of 6.75%, which is, incidentally, the joint-lowest rate of tax in the country alongside Iowa. Considering the Nevadan economy’s dependence on gambling – alongside the frenzied expansion of the practice across the US – this fact may not be surprising. On the other end of the scale, the regulated states with the highest sports betting tax rates are almost exclusively located on the more liberal East Coast, including; New York (51%), Delaware (50%), New Hampshire (50% retail, 51% online), Rhode Island (51%) and Pennsylvania (36%).  

Elsewhere, other states such as Vermont impose tax by operator. Since only DraftKings, Fanatics and FanDuel are allowed in the state – they are charged rates of 31%, 31% and 33%, respectively. Generally, however, the meat of the bell curve for tax rates on gambling in the US lies between 10% and 30%.  

Yet the fast-paced evolution we are now seeing within the US comes with the inevitable caveat of shifting agendas. And as the scale of the industry continues to expand, the conflicting ideologies of operators and regulators have led to disagreements both more frequent and spectacular in nature.  

Conflicting agendas 

It feels as though each new week brings with it a fresh regulatory conflict between operators and lawmakers – perhaps the most flamboyant of which in recent times was FanDuel and DraftKings against the state of Illinois. In June, less than a year after raising sports betting tax to a minimum of 20% (and a maximum of 40% for some operators) the Illinois Gaming Control Board announced in June 2025 it would be levying a 25% tax on all wagers – increasing to 50% for any operators that accept 200 million or more bets.  

Naturally, this essentially limits the 50% rate of tax exclusively to FanDuel and DraftKings, who each responded almost instantaneously by introducing $0.50 transaction fees per wager in the state. This reaction split industry opinion, with some labelling it extreme and others viewing it as a provoked response. Regardless, it represents something of a crescendo to what has been a growing trend of rising tax rates on gambling across the US. In 2025, so far, New Jersey has also inflated its rates to 19.75%, Maryland has increased its mobile wagering tax from 15% to 20% and lawmakers in Louisiana have also passed a bill to increase sports wagering taxes from 15% to 21.5%.  

Elsewhere, proposed raises are also on the table in Wyoming, Pennsylvania, North Carolina, Massachusetts, New Jersey (again) and Ohio. From an operator’s perspective, tax raises must feel as though they are flying in from almost all angles in the US – but there is certainly no indication of the trend slowing down. Regulators, much like operators, have begun to recognise the financial potential of the gargantuan national market and it would appear that they are now looking to ‘cash in’ on the tax revenues that can then be re-invested into industry and elsewhere. 

Positive initiatives pertaining to responsible gambling and related industry areas are becoming increasingly important as the scale of gambling continues to rise in the US. But these kinds of initiatives often only draw smaller investment from the operator’s side – hence one potential reason for fast-increasing tax rates. 

A slippery slope 

Almost as certain as death and taxes is the inevitable response from the operator’s side that these increased taxes will lead players towards the black market. Of course, there is truth in this argument – and while it would be refreshing to hear an alternative argument presented as to why operators shouldn’t have to shell out additional tax funds, it is always an important point to consider.  

Nevertheless, when analysing the recent Illinois hike, DraftKings and FanDuel’s response of imposing a $0.50 transaction fee – to be paid by the players – seems to render this duty of care argument insincere at best.  

What this instant reaction from the nation’s two biggest operators tells us for certain, though, is that they’re worried. Rapidly increasing tax rates are, of course, bad news for industry participants. And FanDuel, alongside DraftKings, will want to send a message to other states not to follow in Illinois’ footsteps of introducing two sizeable levies in one year. This leaves regulators with a tough line to walk… they will not want to give in to the power of any corporate gargantuan. However, increased taxation combined with the subsequent implementation of transaction fees across multiple states is a surefire combination for black-market proliferation.  

Where do we go from here? 

Predicting the future direction of the current US gambling market – even for the most well-versed industry experts – would be as futile an exercise as turning to Kalshi to predict the relationship status of your favourite celebrity couple. 

Something that has become increasingly clear over the past seven years is that the US has no intentions of following any legal, cultural or protective models laid out before it by the more mature European space. A lack of regulatory oversight on sports betting advertising and more emphasis on the self-exclusion model have highlighted that many in the industry want to leave the responsibility in the players’ hands. Nevertheless, when it comes to ensuring a fair marketplace, the direction of future travel seems to be caught between the respective GPS systems of the regulators and the largest operators in the US. And the two sides are at loggerheads.   

Indeed, unification is almost as difficult as predictability. Yet the US industry has certainly united against one of US gambling taxation’s more notable recent developments; Trump’s ‘Big Beautiful Bill’.   

The bill has the potential to all-but-eradicate the professional gambling sector of the US market. This is because, specifically, President Donald Trump’s budget reconciliation bill would only allow for gamblers to deduct 90% of their losses along with any winnings made throughout the year; meaning if a player won $100,000 in 2025 but also lost $100,000, they would still have to pay $10,000 in taxes. Many have suggested the bill has the potential to completely kill the professional gambling industry in the US, irreversibly changing the shape of the wider national market. 

If this happens, improved lines of communication between operators and regulators will become an absolute necessity – as thousands of players will have to be barricaded from flocking to the black market in a stampede.   

This, combined with the reaction of the nation’s two biggest gambling operators to back-to-back tax hikes in Illinois, are two developments that have reverberated across the spine of America’s regulatory network. And if concerns pertaining to the oversight of regulated operators and players is one thing, dealing with the prediction markets, sweepstakes and DFS pick’em operators that are currently circumventing sports betting taxes altogether is another entirely.   

As such, amid the currently ferocious climate of legislative contention pertaining to ‘new wave’ gambling operations – namely; sweepstakes, pick’em DFS and prediction markets – regulators will want to do everything they can to retain some kind of amicable equilibrium with ‘traditional’ gambling operators. If they don’t, it is easy to see the US market becoming something of a toxic free-for-all.  

Handle with care 

Amid the regulatory whirlwind, sports betting continues to  explode in the US – and it won’t be long before a state hits the $3bn monthly handle mark. But who will get there first? 

As we know, the story of modern (regulated) sports betting in the US began with the May 2018 dismantling of PASPA, which saw Delaware become the first state to regulate sports wagering. Indeed, Delaware’s first ever monthly handle saw the state accept $15m in wagers. The soon-to-be big boy market of New Jersey was hot on Delaware’s heels, however, accepting $40.6m in wagers for the month of July.  

Then, in June 2018, New Jersey also legalised sports betting – followed later by Pennsylvania in November 2018, Illinois in March 2020 and New York (mobile) in January 2022. As of August 2025, New York’s cumulative handle ($71.5bn) has now surpassed that of New Jersey’s ($64.5bn). Of course, the regulation of these particular states came amid the simultaneous stampede of state sports betting markets being opened across the country. Nevertheless, since the US has continued to develop into maturity, the New Jersey, New York, Pennsylvania and Illinois markets have become the key jurisdictions of wagering popularity and volume. Now, with sports betting statistics on a meteoric rise in the US, Gambling Insider evaluates which of these states could be the first to surpass the $3bn monthly betting handle mark. 

Looking back, it was the Garden State that surpassed the first major milestone, becoming the first to turn over a $1bn+ monthly sports wagering handle in September 2021. Indeed, in the three years following the overturning of PASPA, New Jersey was undoubtedly the number one state for sports betting in the US. It wasn’t long before it was knocked from its perch, though, as New York exploded onto the scene in 2022 with an initial monthly handle of $1.6bn.  

Naturally, the Empire State was then the first to cross the threshold of the next major milestone, turning over the US’ first ever $2bn+ monthly handle in October 2023. Now, New York also retains the record for highest-ever recorded monthly state wagering handle of $2.48bn. When could New York (or other) break $3bn?