Gambling with Taxes
States are choosing to tweak sports betting tax rates to balance budgets, while rejecting the legalization of online casinos.
The Bulletin Board
THE LEDE: Sports betting tax hike in, iCasino left out of MD budget.
ROUNDUP: FL bill closes regulator to industry pipeline; LVS amends TX project; City of Black Hawk joins NAAiG + Full Member List.
NEWS: DraftKings is prepared for CFTC approval of prediction markets.
NEWS: Arkansas online casino bill has bipartisan support but little time.
AROUND the WATERCOOLER: Where does Kalshi rank as a sportsbook?
STRAY THOUGHTS: A tradition like no other.
SPONSOR’S MESSAGE - Yes, Sporttrade is indeed a prediction market. Always has been.
The Lede: MD Budget: Sports Betting Tax Hike; No iCasino
Maryland lawmakers and Gov. Wes Moore have agreed to a budget framework with a modest tax increase on sports betting (from 15% to 20%). Notably, the framework doesn’t include revenue from legalized online casino games, likely ending 2025 efforts to legalize online casinos.
If approved, Maryland would become the third state to bump its sports betting tax rate in recent years. Ohio doubled its tax rate from 10% to 20% in 2023, and Illinois shifted from a flat 15% rate to a tiered tax rate of 25-40% in 2024.
Several other states have adjusted their rate without explicitly raising taxes: In 2023, Tennessee shifted from a 20% revenue tax to a 1.85% handle tax, which can be construed as a tax rate increase, and four states — Louisiana, Colorado, Maryland, and Virginia — have reduced the amount of promotional spending operators can deduct from their tax obligations.
Moore had proposed increasing the sports betting tax rate to 30% (and brick-and-mortar table games to 25%) in January, as the state was staring down a $3.3 billion deficit. As STTP previously reported, a more modest increase was the most likely outcome: “Industry sources have indicated that the legislative appetite for a tax increase, particularly one that nearly doubles the sports betting rate, is low. As the budget progresses, the increase could become more modest.”
The current framework, per local reporting, includes $2.3 billion in cuts (more than $500 million more than the governor’s budget) and $1 billion in new tax revenue, including higher taxes on Marylanders who earn $750,000 or more, new taxes on IT and data services, and higher taxes on gaming and cannabis.
During a press conference, Senate President Bill Ferguson said, “Maryland is aligning these rates [gaming and cannabis] with our neighboring states, ensuring we remain competitive while generating additional revenue for state programs.” Ferguson also confirmed that the budget framework does not include money from iGaming.
Online casino legalization efforts are pretty much dead in 2025, but not entirely off the table. As I wrote last week:
“Like most states, that deadline is far from firm. Maryland is facing a $3 billion budget deficit, and there is little agreement on how the budget will fill the hole. That will likely end with 11th-hour compromises as the budget is sorted, perhaps reopening the door for online casino legalization to be part of a budget deal.”
Where else have tax changes been proposed in 2025?
Indiana: Indiana State Sen. Fady Qaddoura introduced a bill, SB 394, which would raise the tax on sports betting operators from 9.5% to 11% -- Rep. Ethan Manning’s online casino bill was amended to include a tax increase on mobile sports betting operators from 9.5% to 20%.
Ohio: Ohio Gov. Mike DeWine has proposed doubling the sports betting tax rate on operators from 20% to 40% in his latest budget — DeWine doubled the rate from 10% to 20% in 2023 — the money would go to youth sports and stadium projects.
New Jersey: New Jersey Gov. Phil Murphy’s budget includes tax increases on sports betting and online casinos, with both rates jumping to 25%. A bill, A 5349, introduced by New Jersey Rep. Rosy Bagolie, would push the rate to 30%. A companion bill has also been introduced in the Senate, S 3064.
Massachusetts: SD 1657, sponsored by State Sen. John Keenan and backed by the Public Health Advocacy Institute, would increase the sports betting tax rate to 51%. It also radically restricts the Massachusetts sports betting market.
New York (decrease): A bill, S 6013, filed by Carrie Woerner, the Chair of the New York Assembly Racing & Gaming Committee, would open the New York mobile sports betting market to seven new licensees and decrease the tax burden on all operators from 51% to as low as 25%, with the rate dependent on the number of operators.
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Roundup: FL Bill Closes Pipeline; LVS Amends TX Project; City of Black Hawk Joins NAAiG +Member List
Florida gaming regulator joins FanDuel: A new Florida bill, HB 1467, would prohibit Florida gaming regulators from accepting an industry job within two years of leaving their post. The bill comes after Louis Trombetta, the first executive director of the Florida Gaming Control Commission, accepted a job with FanDuel as Director of Government Relations in December, but the bill’s sponsor said it was about closing the loophole and not Trombetta’s new role.
Las Vegas Sands withdraws Dallas casino project: Gambling expansion in Texas looks like it will have to wait until 2027, as Las Vegas Sands requested the casino portion of its project be removed — that also is a likely end to sports betting efforts in the state. “At this time, given the current status of gaming expansion legislation in the state and certainly some of the concerns that are being spoken in our several meetings here, Sands has asked the Irving City Council to remove the destination resort and gaming component from the proposal…” senior vice president of global real estate development Mark Boekenheide said. That likely means all gambling expansions are off the table this year, and since the Texas legislature meets every two years, it will be a long wait.
The City of Black Hawk, Colorado, joins NAAiG: The National Association Against iGaming (NAAiG) now has a municipality amongst its ranks. Per local reporting, “After a presentation by Jason Gumer, vice chair of NAAiG and Executive Vice President and general counsel for Monarch Casino, the Black Hawk City Council quickly agreed to become the first municipality in the nation to join the newly formed coalition against online casinos.” Gumer warned, “If iGaming comes, you will not see another casino opened, brick and mortar, again. You’re not going to see companies like Monarch, who have invested hundreds of millions of dollars to build new properties. To grow jobs. It’s going to stop.”
Looking at the NAAiG membership roll: In addition to the City of Black Hawk, CO, dozens of publicly known members of the National Association Against iGaming (NAAiG) are listed on the organization’s website. STTP has eliminated properties when the parent company is also a member (there were something like 20 CDI subsidiaries and properties listed) and highlighted strong opposition in potential online casino states:
Accel Entertainment (IL)
Churchill Downs (IL, IN, IA, LA, ME, MD, NH, NY, OH, and VA)
Cordish Companies (LA, MD)
Foundation Gaming (LA)
Illinois Gaming Machine Operators Association (IL)
Hard Rock Sioux City (IA)
Jack Entertainment (OH)
Miami Valley Gaming (50% CDI and 50% Delaware North)
Monarch Casino Resort (CO)
Peppermill Casinos, Inc.
Rivers Casino Des Plaines (CDI, majority owner) (IL)
Seafarers Entertainment and Allied Trades Union
United Food and Commercial Workers Local 27 (22,000 members in Maryland, Delaware, Pennsylvania, Virginia, and West Virginia)
News: DraftKings Roots For CFTC Approval of Prediction Markets
In a recent note following a meeting with DraftKings executives, including CEO Jason Robins, the team at JMP Securities called prediction markets a “top topic of discussion,” and given a friendly Trump administration, “suggests to us prediction markets will be allowed to operate” after the CFTC roundtable scheduled for April 30.
Per JMP:
“[Robins] echoed that it presents an opportunity, similar to his commentary on the 4Q24 earnings call, yet he took it a step further and said the company is rooting for a positive ruling from the CFTC next month… DKNG's interest should come as no surprise, as it filed a trademark for "DraftKings Predict" last summer.”
JMP believes DraftKings et al.'s superior UX, experience/brand, and ability to cross-sell will give it a leg up on the existing prediction market sites like Kalshi:
“DKNG should carry an advantage with its ability to leverage cross-sell vehicles like DK Horse, fantasy, and brand awareness stemming from its national marketing campaigns… an established sports-betting company would have an advantage with its 1) scale and 2) liquidity, both vitally important for a betting exchange.”
The big unknown is how DraftKings and others will deliver an exchange product. “The initial infrastructure will need to be rented from an outsourced company and yet, over time, migrated in-house,” JMP wrote, noting Kalshi could be seen as an acquisition target.
There are some other unknowns, too.
If DraftKings gets its wish (50-state, 18+ sports betting), it will be brought to you by the same companies that have inundated the airwaves with ads for nearly a decade (DFS and sports betting).
What will these same companies do in an even more open, competitive market if regulations and restrictions are relaxed, given that prediction markets are overseen by the CFTC, which doesn’t require the same level of responsible gaming, AML, and KYC checks?
The marketing blitz and unavoidable pushback could make the current debate look like child’s play. And at the end of the day, we’ll see if RG is at the heart of everything [insert company name] does when it’s not mandated.
And considering the entry in today’s Watercooler section, I suspect DraftKings isn’t the only company taking notice of the prediction market opportunity.
News: Arkansas iCasino Bill Has Bipartisan Support
Two identical bills legalizing online casino games and prohibiting sweepstakes have been filed in the Arkansas House (HB1861) and Senate (SB524). SB 524 was later withdrawn.
The bills were filed by republican lawmakers, State Rep. Matt Duffield and State Sen. Dave Wallace, with HB 1861 picking up 12 cosponsors from both sides of the political aisle, including Senate president pro tempore Bart Hester.
Per local press, the legislation will likely be on ice until the legislature returns in April. The Arkansas legislature is slated to adjourn on April 11, so time will be of the essence.
Here’s the summary of the legislation:
“An act to make the operation of an illegal online casino or sports betting a felony; to amend the law concerning interactive gaming; to create the Interactive Gaming Act; to expand interactive gaming to include name, image, or likeness drawing games and casino gaming; to declare an emergency; and for other purposes.”
The bill would create up to three online gambling licenses, one for each of the state’s licensed casinos “limited to one (1) branded interactive gaming system that is identified with the casino licensee.” In addition to traditional online casino games, it also authorizes online 50/50 raffles that designate proceeds to a name, image, and likeness collective.
The anti-sweepstakes part of the legislation reads:
“A person or entity commits the offense of keeping a gambling house if the person or entity: (1) Keeps, conducts, or operates, or who is interested directly or indirectly in keeping, conducting, or operating any gambling house or place, whether a physical location or online, where gambling is carried on.”
“Makes available or participates in keeping, conducting, or operating any game, contest, or promotion… that utilizes a dual-currency system of payment that allows the player to exchange the currency for a prize, award, cash, or cash equivalent, or a chance to win any prize, award, cash, or cash equivalent, and simulates: (i) Casino-style gaming, including without limitation slot machines, video poker, or table games that include without limitation blackjack, roulette, craps, and poker; (ii) Lottery games, including without limitation draw games, instant win games, keno, and bingo; and (iii) Sports wagering.”
Importantly, social, free-to-play sweepstakes and licensed online casinos are exempt:
“A sweepstakes game that does not award cash or a cash equivalent is not included under subdivision (a)(4) of this section.”
“Subdivision (a)(5)(A) of this section does not apply to a casino licensed by the commission.”
The focused language likely has to do with the Social and Promotional Games Association (SPGA) warnings that sweepstakes bills “risk criminalizing not only social sweepstakes but also standard promotional tools used by countless U.S. companies, including McDonald’s, Coca-Cola, Pepsi, Burger King, Amazon, and American Airlines” The SPGA is a trade group representing at least 11 companies in the sweepstakes space.
So what chance does the bill have?
As STTP noted, even before the bills were announced, there has been an increase in behind-the-scenes chatter in Arkansas. Still, a short window and an ongoing dispute between Saracen Casino (pro) and Oaklawn Casino (against) complicate efforts.
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Around the Watercooler
Social media conversations, rumors, and gossip.
There is a line in Bert Kreischer’s “The Machine” skit where he says, “We roll into the bar cart like a big d**k in a locker room.” That’s exactly how Kalshi is rolling into March Madness.
The above tweet was captured on Friday. By the end of Sunday, Kalshi had approached $200 million on the opening weekend, although it’s not 100% clear if that figure is an apples-to-apples comparison with sports betting handle.
Remember, legal estimates for March Madness betting (for the entire tournament) ranged from $2.6 billion (EKG) to just over $3 billion (Vixio and AGA). Kalshi is fast approaching 10% of that total at the end of the second round.
As Dustin Gouker recently said in his Closing Line newsletter, “I am not sure everyone is taking the threat/opportunity of nationwide sports betting via Kalshi and Robinhood seriously enough.” Gouker has also noted that based on trading, Kalshi is likely one of the largest sportsbooks in the US (not named FanDuel or DraftKings).
Stray Thoughts
Facebook memory from 15 years ago:
“My Bracket looks eerily similar to one of my tests from high school, full of red lines and corrections... All that's missing is an ‘I expect better from you’ written at the bottom.”