Industry Analysis: Could Massachusetts Pursue Sports Betting Tax Increase?

Written By TJ McBride on June 5, 2024
Massachusetts Sports Betting Tax Rate

Illinois and New Jersey are considering increasing their sports betting tax rate on operators. Some states like Ohio, meanwhile, have already done so recently.

Could Massachusetts be the next state to consider raising sportsbook taxes? Some lawmakers have already attempted and failed to do so this legislative session, but that does not mean the fight for a higher tax rate is over.

Massachusetts sports betting has been a huge success. And because of that, lawmakers want a bigger cut of the profits. But while lawmakers attempt to raise the tax rate, operators will be doing what they can to fight back.

Illinois, New Jersey want to impose higher tax rates on sportsbooks

The Illinois Senate already approved the 2025 budget which includes the new sliding scale sports betting tax rate. The bill still has further to go in the legislative process, but it is clear there is an appetite among lawmakers to increase the tax rate.

The bill to accomplish this goal is known as HB 4951, and it could lead to a tax rate as high as 40%. Only the most profitable operators would pay the maximum tax rate. For operators who hit that upper echelon tax bracket, the tax rate will be the second highest in the country to only New York’s 51% tax rate on retail sportsbooks.

This is how the tax rate scale breaks down for operators based on their adjusted gross revenue:

  • Under $30 million: 20%
  • $30-$50 million: 25%
  • $50 million to $100 million: 30%
  • $100 million – $200 million: 35%
  • Over $200 million: 40%

That is a massive tax hike from the original 15% operators have been paying to operate in Illinois. The only other state that has a similar method of taxing sports betting operators is Arkansas, where operators pay 13% in taxes for under $150 million of gaming revenue. That rate increases to 20% if adjusted gross revenue amounts to more than the threshold.

New Jersey also wants to increase its sports betting tax rate on operators. The bill aimed at that goal is Senate Bill No. 3064, introduced by New Jersey Sen. John F. McKeon. It proposes an increase of the current 13-15% rate to 30%.

Massachusetts Senate rejected sports betting tax increase proposal

Some Massachusetts lawmakers, such as Senator John Keenan, wanted to increase the tax rate like Illinois and New Jersey are trying to do, and they are not being shy about it.

The current sports betting tax rate in Massachusetts is 20%, which is more or less in line with the rest of the country. Keenan proposed the tax rate be increased by more than double to 51%. That would make Massachusetts the highest tax rate in the country. New York also has a 51% tax rate, but that is only on retail wagers, not mobile sportsbooks.

Keenan might have come on too strong because Massachusetts Senators quickly killed the proposal via a voice vote on May 23.

Proponents still want higher sports betting tax rates

It makes sense why this desire exists in the Massachusetts Senate. From 2022 to 2023, the state saw a 47.3% gaming revenue increase. Overall, 2023 gaming revenue in Massachusetts amounted to $1.7 billion, and a huge reason for the growth in revenue is the legalization of sports betting.

There is precedent for a state to increase its sports betting tax rate shortly after going live with legal sports wagering. Ohio increased its tax rate from 10% to 20% six months after sports betting legalization.

Despite this proposal being shot down, some Massachusetts lawmakers clearly feel the tax rate should be increased. And sports betting operators will undoubtedly fight back against such proposals, as many are in Illinois.

Further increase attempts may lead to pushback from Massachusetts sportsbooks

If Massachusetts lawmakers once again attempt to raise its tax rates on sports betting operators, the pushback could be even more dramatic.

Illinois’ current predicament is an ideal example. In response to the Senate approving the tax increase, a coalition of many major sports betting operators, known as the Sports Betting Alliance, warned that operators may take their business out of Illinois.

“Sportsbooks across the industry will have no choice but to reevaluate their level of investment and participation in the state should this become law.”

Sports Betting Alliance President Jeremy Kudon has called the Illinois sports wagering tax hike bill an “extremely disappointing decision that will cause real harm,” according to SBC Americas.

Kudon also warned that an influx of operators leaving the state could, in turn, lead to illegal offshore betting becoming the popular option:

“This tax hike will mean worse products, worse promotions, and inevitably, worse odds for Illinois customers – not to mention provide a massive leg up to dangerous, unregulated and illegal offshore sportsbooks who pay no taxes and adhere to none of Illinois’ sports betting regulations.”

Photo by Dreamstime / PlayMA
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TJ McBride

T.J. McBride lives in Denver, Colorado and is best known for his work covering the Denver Nuggets for outlets such as FiveThirtyEight, ESPN, Bleacher Report, and other major outlets. After a decade covering the NBA, T.J. has now stepped into the gaming space and now reports and writes on gambling news across the nation.

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