Are State Lawmakers Driving Sports Bettors Back to Black Market With High Taxes?
Posted on: September 20, 2025, 10:40h.
Last updated on: September 20, 2025, 10:40h.
- High taxes on online sportsbooks could be fueling the illegal market
- A consumer policy institute encourages state lawmakers to stop raising online sports betting taxes
With legal sports betting booming in the United States, many state lawmakers continue to seek a larger piece of the pie through higher taxes. State governments’ seemingly never-ending tax hikes on legal sports betting could be driving some consumers back to the black market, so says a prominent consumer research institute.
In an op-ed published in The Hill, Justin Leventhal, a senior economist at the American Consumer Institute, writes that state lawmakers’ high tax policies on online sportsbooks are rigging the odds against consumers. He justifies that the many regulated sportsbooks in the 33 states and Washington, DC, where online sports bets are allowed, force their high tax obligations onto consumers by offering poorer odds compared with offshore, unregulated, untaxed online bookies. High-taxed online sportsbooks have also reined in their promotions and incentives.
If adults are free to gamble, then they should be free to do so without punitive tax schemes that drive up costs and push bettors back toward the black market,” Leventhal opined.
“A modest, predictable tax structure gives operators certainty, encourages competition, and leaves consumers with better odds and lower costs. It also provides states with a sustainable source of revenue without driving bettors to untaxed offshore sites where they can easily be taken advantage of,” Leventhal continued.
Sports Betting Tax Hikes
Leventhal’s column comes after Illinois in June raised its effective tax on online sportsbooks for a second time in only a year.
In 2024, Illinois implemented a graduated tax, which jacked up the effective rate on market leader FanDuel from 15% to 40%. Then, earlier this year, Illinois lawmakers implemented a per-bet fee of 20 cents. The levy increases to 50 cents per bet a book takes once the books facilitate more than 20 million bets in a year.
New Jersey also raised its online sports betting tax this year. Effective as of June, online sportsbooks direct 19.75% of their net win to the state. Before the tax hike, 15% of the online sports betting revenue went to Trenton. When New Jersey first legalized sports betting, online oddsmakers shared only 13% with the state.
Sports betting taxes were also increased this year in Louisiana from 15% to 21.5%. The new rate became effective Aug. 1.
Gaming analysts have advised investors that most online sportsbook operators will mitigate the higher taxes by reducing promotions. That might be good for shareholders, but certainly not in the consumers’ best interests.
Mixed Consequences
In Illinois, the higher taxes on online sports bettors haven’t yet seemed to turn the public back to offshore sports betting websites. Total online sports betting handle, or the amount of money risked, has grown from $7.14 billion in 2024 (January through July) to $8.25 billion through the seven months in 2025. That’s 15.5% year-over-year growth.
In New Jersey, it’s a different story.
Through August, online oddsmakers have taken $7.2 billion in bets. At this time last year, the total amount of sports bets made online was north of $7.82 billion, a difference of more than $616.1 million. Online sports betting in New York began in January 2022.
If bettors feel squeezed by bad odds, fees, and disappearing perks, they may return to the unregulated platforms that are not burdened by punitive regulations,” Leventhal continued. “Pushing people back to the illegal market undermines consumer protections, cuts into state revenues, and defeats the very purpose of legalization.”
The American Consumer Institute’s mission is to promote consumer welfare through education and public policy.
No comments yet