'Cause I'm The Taxman

When it comes to taxes, the gambling economy is getting hit from all sides. States are raising taxes on operators and the federal government is raising taxes on gamblers.

Steve Ruddock

Jul 09, 2025

THE LEDE: ~~Two~~ Three more states consider increasing online gambling taxes.
ROUNDUP: NY iCasino ‘when not if’; Electronic Table Games proliferate; UNLV’s new tribal gaming initiative; CA sweeps-bill passes committee.
NEWS: Checking in on late online casino pushes in three states.
AROUND the WATERCOOLER: NY bill would eliminate gambling loss deduction, something many states already prohibit or restrict.
STRAY THOUGHTS: An apropos Beatles song.

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The Lede: NC and WY Consider Increasing OSB Tax Rates

Illinois was a significant loss, but the US online gambling industry managed to stave off or limit efforts in several other states. Ohio decided not to increase its online sports betting (again), while New Jersey, Maryland, and Louisiana settled on modest increases. However, the industry isn’t out of the woods just yet.

North Carolina Senate’s budget would increase the sports betting tax rate from 18% to 36%, while the provision was not in the House budget. The North Carolina budget process (which is currently in conference committee) could drag on well into the summer; the North Carolina constitution lets the state operate under the prior year’s budget if a new budget isn’t signed by the July 1 deadline.

And then there is Wyoming, where the Select Committee on Capital Financing and Investments approved a proposal to draft a bill increasing the online sports betting tax rate from 10% to 20%, and potentially eliminating promotional deductions.

As previously reported in STTP:

“A Wyoming legislative committee is proposing three tax hikes on multiple gaming industries [skill games, parimutuel, HHR machines, and sports betting], and a plan to insert a money-monitoring system into gaming machines across Wyoming bars, casino-style halls and truck stops.”

And as I mentioned on Monday, there appears to be some backchannel chatter about a tax increase in Pennsylvania:

“A new call to action from the Sports Betting Alliance points to a potential tax increase on mobile sports betting and/or online casinos in the state: “Right now, some Pennsylvania lawmakers may be considering a tax hike on online betting, including sports wagering, table games, and slots. With unfair tax hikes like this, everyone loses—but especially customers!” Pennsylvania already has very high tax rates, but the state does allow for promotional deductions (which STTP previously pointed to as a reason to watch Pennsylvania), which significantly reduce operator tax obligations.”

Here are the tax increases passed in 2025 thus far:

Maryland: Increased the tax on mobile sports betting from 15% to 20%.
Louisiana: Bumped its tax rate from 15% to 21.5%.
New Jersey: An across-the-board (casino, sports, DFS) rate increase to 19.75%.
Illinois: Added a $.25 per wager fee on the first 20 million wagers, $.50 thereafter.
Colorado: passed a bill that sunsets promo bet deductions.

And looking back to 2023, the trend becomes quite troubling if you’re an operator:

Previous tax increases (most dealing with promotional credit deductions):

Ohio (2023): Doubled its tax rate from 10% to 20% in 2023.
Tennessee (2023): Shifted from a 20% revenue tax to a 1.85% handle tax.
Illinois (2024): Shifted from a flat 15% rate to a tiered tax rate of 25-40% in 2024.
Louisiana (2024): Reduced the amount of promotional spending that gaming operators can deduct from their tax obligations.
Colorado (2024): Imposed a phased reduction on the amount of promotional spending that sports betting operators can deduct from their taxable revenue.
Maryland (2024): Decreased the allowable deductions for promotional spending by gaming operators.
Virginia (2024): Reduced the amount of promotional spending deductions for sports betting operators.

Roundup: NY iCasino; Rise of Electronic Table Games; UNLV Tribal Gaming Initative; CA Sweeps-Bill Update

Key New York lawmaker remains bullish on online casinos [Pokerfuse]: Despite the state’s failed attempts at legalization dating back to online poker efforts in the mid-2010s, New York State Sen. Joseph Addabbo thinks iCasino legalization is a matter of when not if. “Speaking at the ribbon-cutting ceremony for FanDuel’s new headquarters in New York earlier this week, an event attended by company executives and state officials, Addabbo used the opportunity to emphasize the inevitability of iGaming expansion. “It’s not a question of if, it’s a question of when — and when it happens, we’re really going to blow this out of the water,” Addabbo said.

Electronic table games have proliferated since the COVID-19 pandemic [CDC Gaming Reports]: Electronic table games have gained a foothold in US casinos. As CDC Gaming Reports notes, ETGs attract younger players with lower minimum bets, faster play, and interactive features. They provide operators with cost efficiency, requiring fewer staff than live tables, and deliver consistent revenue. ETGs appear to be one piece of an evolving brick-and-mortar casino sector (for better or worse).

UNLV partnerships prepare students for careers in tribal gaming [Las Vegas Sun]: The University of Nevada, Las Vegas (UNLV) is establishing itself as a key training hub for the tribal gaming industry. “The university’s William F. Harrah College of Hospitality has established pathways for students at tribal colleges to easily transfer up to two years of credits, or associate degrees, to UNLV, where they can complete bachelor’s degrees with a focus on tribal gaming or hospitality management either in person or online.” You can check out my coverage of the work AISES is doing on this front (and in STEM in general).

California Committee passes anti-sweepstakes bill [Casino Reports]: The California Senate Governmental Organization Committee advanced AB 831, a bill banning online sweepstakes casinos in a 10-0 vote on Tuesday. Critics, including the Social and Promotional Games Association (SPGA) and the Social Gaming Leadership Alliance (SGLA), argue that it lacks stakeholder and public input. “This bill isn’t about protecting players. It is about protecting incumbents from competition,” said Jeff Duncan, Executive Director of SGLA and former Congressman — Previous STTP coverage of California’s anti-sweepstakes bill.

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News: Late Online Casino Pushes in Maine, MA, and Ohio

Three states are still considering the legalization of online casinos.

Maine

The Maine legislature sent a bill legalizing online casinos to the desk of Gov. Janet Mills. An online casino bill clearing the legislature is typically a spike-the-ball victory dance from the pro-online gambling crowd, but there’s hesitation to declare victory due to Gov. Janet Mills’ expected veto.

Per local reports, Mills didn’t take action on the bill, as the Governor is “prohibited from vetoing the bills because lawmakers adjourned the 2025 session but could still put her veto pen to work when they return,” for the next legislative session.

The Mills administration, the Maine Gambling Control Unit, and Gambling Control Board all testified against the online casino bill.

As I previously noted, the bill would grant online casino exclusivity to the state’s tribes, excluding the two commercial casino operators, Penn National Gaming and Churchill Downs, which oppose the bill. And with the current mobile sports betting partnerships in the state, FanDuel also opposes the bill:

“The concern is that it will be shut out of the market, as DraftKings has already partnered with the Passamaquoddy Tribe, and Caesars has partnered with the Penobscot, Maliseet, and Micmac Tribes. These existing partnerships would limit the market to two operators.”

Massachusetts

A hearing in Massachusetts on two online casino bills (details here), Sen. Paul R. Feeney’s S 235 and Rep. Daniel Cahill’s H 332, allowed both sides to put their respective points of view on the record but didn’t result in much hope that a bill will progress in 2025.

Ohio

And then there are concurrent efforts in Ohio (HB 298, sponsored by House Finance Committee Chair Brian Stewart, and Sen. Nathan Manning’s bill, SB 197). The bills are flying under the radar, but for a different reason — STTP believes the industry thinks Ohio is in play and doesn’t want to draw added attention (and more negative lobbying) as the bill is discussed.

There have been slow trickles of information suggesting that the effort is still active, particularly from the anti-online side, which continues to rally support against the bill.

Around the Watercooler

Social media conversations, rumors, and gossip.

It looks like Congress is serious about righting a wrong, as the gambling deduction cap that found its way into the One Big Beautiful Bill is coming under a lot of scrutiny:

Meanwhile, New York is telling the federal government to hold its beer:

Per Linnehan’s reporting:

“Sen. Andrew Gounardes introduced SB 7876 in May, an act to amend New York’s tax law to reduce the allowable itemized deduction for gambling losses to 0%. The state currently allows professional gamblers to deduct any and all losses as long as they do not eclipse a gambler’s winnings for the year.”
The bill sponsor, State Sen. Andrew Gounardes said, “I don’t think we should be subsidizing people who are gambling and incentivize them to gamble more, to cover their losses for them,” during a late May public hearing of the bill.

12 states (that I can find) already prohibit or limit gambling deductions.

Author’s note: The following analysis broadly applies to non-professional gamblers.

No fewer than six states — Connecticut, Louisiana, Maine, Ohio, Rhode Island, and Vermont — use federal AGI as the starting point for their tax returns, which would prevent gambling loss deductions for non-professionals. There are more AGI-based states (Alabama, Kentucky, Mississippi, New Mexico, and Oklahoma), but I am unable to determine if they allow gambling loss deductions.

A fifth state, Wisconsin, starts with federal AGI and does not allow direct itemized deductions for gambling losses for non-professionals. It does allow taxpayers to subtract documented per-session losses from their income, thereby reducing taxable winnings. This is not a traditional deduction but an adjustment, meaning Wisconsin still taxes gross winnings at a flat 4.65% unless this adjustment is claimed.

Kansas prohibits deductions for gambling losses on state returns.

Michigan has allowed gambling loss deductions since 2021 for taxpayers who itemize their federal taxes.

Three states tax gambling winnings at a specific rate with no deductions:

Illinois: Illinois taxes gambling winnings at a flat 4.95% rate and does not permit deductions for gambling losses.

Indiana: Indiana has a flat tax rate of 3.23% on all income, including gambling winnings, and does not allow deductions for gambling losses.

North Carolina: North Carolina taxes gambling winnings at 4.25% and explicitly disallows deductions for gambling losses.

And then there are Massachusetts and West Virginia, which are a little more complicated. Both states allow gambling loss deductions for losses incurred at state-licensed gaming establishments. Out-of-state or unlicensed gambling losses are not deductible.

Stray Thoughts

Should five percent appear too small
Be thankful I don't take it all
'Cause I'm the taxman