How to Sensibly Raise Sports Betting Taxes? Louisiana Is Close to Setting an Example

Louisiana Raises Betting Tax with Reason

Louisiana’s Senate passed the bill to increase the sports betting tax from 15% to 21.5% with a 35-3 vote. The legislation is now in the final stretch of its journey, with its fate resting solely on Governor Jeff Landry. There are no significant indications that the governor would block the hike, meaning Louisiana will soon join the states that have raised betting taxes this year, alongside Maryland, Colorado, and Illinois.

HB 639 proposes creating new funds to allocate the additional revenue. Twenty-five percent of the proceeds will go to the Supporting Programs, Opportunities, Resources, and Teams (SPORT) Fund. These funds will be evenly distributed among the athletic departments of NCAA Division I public universities by the Board of Regents, usable for scholarships, insurance, medical care, facility upgrades, dispute resolution fees, and Alston Awards. Six universities will be eligible to receive these funds, which cannot be used to finance student-athlete compensation (such as NIL).

Additionally, 3% of mobile sports betting tax revenue will be allocated to the Louisiana Post-secondary Inclusive Education Fund for students with disabilities.

Louisiana’s sports betting revenue is estimated to rise from $70 million to $98.5 million, helping to address a projected $338.9 million budget deficit in 2026.

Three Sensible Hikes and… Illinois

How does Louisiana’s tax hike compare to other increases this year? In Colorado, the decision to eliminate promo deductions effectively aligns the tax rate with the base 10%. Previously, promo deductions allowed operators to pay no more than a 6% tax, an extremely low rate nationwide.

While Colorado’s move is grounded in reason and hard to dispute, Illinois Governor J.B. Pritzker took a more drastic step, introducing a flat per-bet fee in next year’s budget. Up to $20 million in bets, operators will pay 25 cents per wager, and above that threshold, 50 cents. This is by far the most painful blow to operators in terms of tax changes. Interestingly, the second most significant seems to be last year’s Illinois shift to a progressive tax rate.

The changes in HB 639 fall in the middle, leaning closer to Colorado. Amid national debates about betting tax hikes, New York’s 51% rate, Illinois’ shifts, and numerous stringent proposals elsewhere, the proposed increase from 15% to 21.5% feels very rational. It boosts state revenue without significantly shaking the betting market.

Maryland made a similar move, raising the tax rate for sports betting operators from 15% to 20% in its 2026 fiscal budget. Notably, Governor Wes Moore initially proposed a 32% rate, but a 20% compromise was reached, to the industry’s relief.

The Fourth, and Likely Not the Last, Hike

Generally, a tax rate between 15% and 25% is considered reasonable, and if states with lower rates opt for hikes within this ideal range, operators should breathe a sigh of relief. Recently, too many proposals, like Massachusetts’ SD 1657, which would raise the tax to 51% and mandate affordability checks, would hit the industry far harder.

Every tax rate increase will hurt operators in some way, but in the current legislative climate, it’s hard to protest moves like those in Maryland or, soon, likely Louisiana.

“The industry […] was generally successful in the first few years of the post-PASPA in advocating for tax rates in the range of 10% on the basis that sports betting was a low margin business, as it historically was in Nevada. The advent of same game parlays and other offerings has boosted the margin of operators so that argument has been somewhat weakened, it’s fair to say,” noted James Kilsby, Chief Analyst & VP Americas at Vixio Regulatory Intelligence, in US iGaming Hub.

Overall, the industry is somewhat a victim of its own success, and it’s no surprise that states seeking to patch budget deficits turn to heavier taxation. After a period of tax stability, we’ve entered an era where tax change proposals sprout. Proposals balancing state and operator interests, however, deserve proper recognition.