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Industry lobbyists warn that sports-betting tax rates will continue to be a hot topic in 2025, especially in those states facing significant budget deficits.

“Proactive communication needs to continue in current and existing states on the positives of sports betting, iGaming, and why a low, stable tax rate is beneficial to everyone,” said Brendan Bussmann, founder of Las Vegas advisory firm B Global.

The sports-betting industry dodged a bullet when a bill that would have more than tripled the sports-betting tax rate in Louisiana as part of Republican Governor Jeff Landry’s broader tax reform package was shelved last month.

House Bill 22, authored by Republican state Representative William Wilder III, would have brought Louisiana in line with the 51 percent tax rate imposed in New York, Rhode Island and New Hampshire. Louisiana currently has a 15 percent tax rate on online sports-betting gross revenue.

Analysts estimated a 51 percent tax rate would generate $205.3m in taxes for Louisiana in this fiscal year, an increase from the $52.2m under the current rate that was set by a 2021 state law.

In addition, Wilder proposed the elimination of promotional credits to players. Currently promotional play is permitted, and up to $5m in credits can be deducted from operators’ tax calculations.

“The sudden proposed rise in the sports betting tax in Louisiana became a discussion of ‘Don’t tax you, Don’t tax me, tax the man behind the tree’,” Bussmann told Barry Jonas, a gaming analyst with Truist Securities, in a report.

Bussmann believes that truck stops and video poker terminal operators in Louisiana lobbied for the increase not fully understanding the economics of sports betting and more looking to cause retribution to a segment of the industry. 

Truck-stop video poker terminal operators in Louisiana are taxed at 32.5 percent. Louisiana is facing a $700m budget shortfall, and supporters of the tax increase believe it would help the state close its deficit as part of a broader initiative to reform the state's tax code for the first time since the 1970s.

“While Louisiana is in a budget deficit, sports betting tax increases were tabled for at least this special session (in November) but may come up again in 2025,” Bussmann said. “What is surprising is that this looks to make changes to a voter-approved initiative in its infancy for the new type of gaming.”

As Louisiana lawmakers are expected to debate raising the sports-betting tax again next year, a similar effort in New Jersey seems to have stalled due to industry and legislative opposition to a pending bill authored by state Senator John McKeon, a Democrat, that would raise the state tax rates on both sports betting and iGaming.

McKeon’s bill, S 3064, would raise both tax rates to 30 percent from 15 percent for internet gaming and 13 percent for online sports betting.

Bill Pascrell III, a lobbyist with Princeton Public Affairs Group, considers McKeon a good friend but said he knows nothing about gaming.

Pascrell stressed that the bill is “not going anywhere anytime soon”.

“Every casual observer that’s not part of this industry thinks this industry is massively profitable,” Pascrell said. “So, you have to educate that the margins are thin in sports betting. They’re a little bit better in iGaming.”

Martin Lycka, senior vice president for American regulatory affairs and responsible gaming at Entain, is hopeful that lawmakers in Ohio could reverse their 2023 move to double the state's sports-betting tax rate from 10 percent to 20 percent of gross revenue.

Republican Governor Mike DeWine first proposed the increase barely two months after the launch of legal sports wagering on January 1, 2023. 

“Any other state that’s considering raising taxes, hoping that could fix all the other problems, well, I would strongly suggest that’s not necessarily the way you’re better off,” Lycka said. “That’s the key message.”

Bussmann suggested that DeWine was never a fan of sports betting and noted that a new bill introduced in the legislature would return the tax rate to 10 percent. Republican Senator Niraj Antani, who authored the bill that legalized Ohio sports betting in 2022, is proposing cutting the rate.

However, the fate of Antani’s efforts to reduce the sports wagering tax rate is uncertain as the two-term senator did not run for re-election and his current term ends on December 31.

Earlier this summer, three Republican House members on an 11-person study commission came out in opposition to the tax hike, saying it has hampered the industry’s growth.

Lawmakers in other states have also raised sports-betting tax rates.

In July, Illinois Governor J.B. Pritzker, a Democrat, signed a budget law that created a new tiered tax structure for sports betting ranging from 20 percent to 40 percent, up from the initial 15 percent.

Pascrell added that now that legal sports betting is generating meaningful revenue, it makes the casual politician think maybe they can grab more money by raising taxes.

“When taxes are increased on the licensed regulatory regime, we’re putting a burden on the people who are acting responsibly, legally in regulatory compliance and we are doing nothing to penetrate the black market,” Pascrell said.

“Low taxes like we have in multiple states, including New Jersey, have proven to do incredibly well.” 

Both Pascrell and Lycka were speaking during a webinar organized last month by Gaming Americas.