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How states are allocating sports betting tax revenue
The 38 states (plus D.C.) with legal sports wagering all use their betting-related tax revenue in different ways. Most states allocate the majority of revenue to a general fund, but some are earmarking it for more specific purposes.
With the explosive growth of the sports betting industry, states with legalized sports betting are enjoying a healthy influx of additional tax revenue. That tax revenue will only continue to grow as the industry continues to expand, especially with an ongoing trend of states increasing their tax rates on sports betting.
Since the Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) in 2018, one key decision that states have faced in the process of legalizing sports betting is how to allocate tax revenue. Generating additional tax revenue for the state is one of the primary motivations for states to legalize sports betting, along with improving their ability to provide regulatory oversight.
Each state takes a slightly different approach to how it allocates sports betting tax revenue. Many states simply allocate the revenue to their general state fund, without dedicating that money to any particular purpose. Other states have chosen to direct those funds to more specific areas, such as public education or state infrastructure.
This article summarizes how the 38 states and the District of Columbia are currently allocating their sports betting tax revenue, according to the American Gaming Assocation (AGA). Additional details on each state’s allocation can be found at the AGA or at each state’s regulatory agency.
Overview of sports betting tax revenue allocations
How states allocate their betting tax revenue generally falls into one of several categories. Some of the most common recipients of sports betting tax revenue are the state’s general revenue fund, responsible gaming initiatives and gaming or regulatory operations.
General state funds
The most common allocation of sports betting tax revenue is to each state’s general revenue fund. A state’s general revenue fund is its primary operating fund used to finance the general operations and activities of the state.
Unless otherwise specified, any revenue the state receives goes into the general fund, which includes revenue from personal income taxes, corporate income taxes, sales taxes and other taxes and fees, such as “sin taxes” (e.g. tobacco and alcohol) or insurance premiums. States use the general revenue fund to cover a wide range of operational expenses, including day-to-day government operations, public education, public safety and criminal justice, health and human services, and state infrastructure projects.
Of the 38 states with legalized sports betting (along with D.C.), 20 of them are allocating at least some of their betting tax revenue to the general revenue fund. Most of those 20 states allocate at least half of the revenue to the general fund, and many of them allocate as much as 90% of the revenue. Three states – Montana, Pennsylvania and Rhode Island – allocate 100% of sports betting tax revenue to the general fund.
Responsible gaming and problem gambling
Every state with legalized sports betting is also required to provide responsible gaming and problem gambling services to support any sports bettors who struggle to gamble responsibly and might be suffering from gambling addiction. States provide responsible gaming educational resources to help prevent gambling addiction, and they also offer support services such as hotlines and counseling to treat gambling addiction.
While the costs for providing responsible gaming and problem gambling services are relatively low compared to other state expenses, some states choose to fund their responsible gaming programs directly with sports betting tax revenue. Generally, states allocate only a small portion of their sports betting tax revenue to responsible gaming. Massachusetts allocates 9% of its sports betting tax revenue to support problem gambling research, prevention, and recovery, which is the highest percentage of any state. Most other states allocate around 2.5% or a set amount. North Carolina allocates $2 million annually, while South Dakota allocates up to $30,000.
There are 13 states overall that specify a portion of sports betting tax revenue be dedicated to responsible gaming and problem gambling programs. The other states fund their responsible gaming programs through other sources.
Gaming and regulatory operations
Another common way states use their sports betting tax revenue is to cover the administrative and operational costs of regulating the sports betting industry in their states. Each state has an agency dedicated to overseeing the gambling industry. In some states, the state lottery performs this function. In others, a state gaming and/or racing commission or control board provides regulatory oversight.
Like with responsible gaming allocations, the overall percentage of sports betting tax revenue that goes towards gaming and regulatory operations is generally low. Arizona provides up to 10% of revenue to the Arizona Department of Gaming, which is the highest percentage that any state allocates for this purpose. Most other states allocate an unspecified amount but indicate that a portion of revenue is dedicated to these administrative costs.
There are 10 states overall that specify a portion of their sports betting tax revenue be dedicated to the operational and administrative costs of sports betting regulatory agencies.
Summary of revenue allocations
The table below summarizes how each state is allocating its sports betting tax revenue. For the sake of simplicity, this table indicates whether states direct any money toward these common and general categories, but does not specify what percentage of tax revenue goes to each area. Those details can be found at the American Gaming Association or at each state’s gaming regulatory agency.
While the three categories discussed above represent the most common recipients of sports betting tax revenue, many states also choose to allocate that money to specific initiatives within their state. The most common example is public education, with nine states directing funds toward the state school systems. Other examples include supporting local municipalities and county governments, state employee pensions and insurance programs, or infrastructure projects. Any state allocating money to a separate program like this is indicated in the “Other” column below, with some notable examples discussed further below.
| State | General Revenue Fund | Responsible Gaming | Gaming and Regulatory Operations | Other |
|---|---|---|---|---|
| Arizona | ✔ | ✔ | ||
| Arkansas | ✔ | ✔ | ||
| Colorado | ✔ | ✔ | ||
| Connecticut | ✔ | ✔ | ✔ | |
| Delaware | ✔ | |||
| District of Columbia | ✔ | |||
| Florida | ✔ | ✔ | ||
| Illinois | ✔ | |||
| Indiana | ✔ | ✔ | ||
| Iowa | ✔ | |||
| Kansas | ✔ | ✔ | ✔ | |
| Kentucky | ✔ | ✔ | ✔ | |
| Louisiana | ✔ | ✔ | ||
| Maine | ✔ | ✔ | ✔ | ✔ |
| Maryland | ✔ | |||
| Massachusetts | ✔ | ✔ | ✔ | |
| Michigan | ✔ | |||
| Mississippi | ✔ | |||
| Montana | ✔ | |||
| Nebraska | ✔ | ✔ | ✔ | |
| Nevada | ✔ | ✔ | ||
| New Hampshire | ✔ | |||
| New Jersey | ✔ | ✔ | ||
| New Mexico* | ✔ | ✔ | ||
| New York | ✔ | |||
| North Carolina | ✔ | ✔ | ✔ | ✔ |
| North Dakota* | ||||
| Ohio | ✔ | ✔ | ✔ | |
| Oregon | ✔ | |||
| Pennsylvania | ✔ | |||
| Rhode Island | ✔ | |||
| South Dakota | ✔ | ✔ | ||
| Tennessee | ✔ | ✔ | ||
| Vermont | ✔ | ✔ | ||
| Virginia | ✔ | ✔ | ||
| Washington* | ✔ | |||
| West Virginia | ✔ | |||
| Wisconsin* | ✔ | |||
| Wyoming | ✔ | ✔ |
*New Mexico, North Dakota, Washington and Wisconsin only offer sports betting at tribal casinos, and their revenue from sports betting is based on their tribal compacts with each tribe. New Mexico’s compacts provide it with tax revenue, while Wisconsin has revenue-sharing agreements with its tribes. Washington receives compensation to cover the costs of regulatory oversight, while North Dakota does not receive any revenue from sports betting.
Unique examples of sports betting tax revenue allocation
Several states take a unique approach to how they allocate some or all of their sports betting tax revenue. These are some noteworthy examples worth discussing in more detail.
Kansas
Kansas is trying to use money from sports betting to help it attract a professional sports franchise to the state. More specifically, it is attempting to lure the Kansas City Chiefs and/or the Kansas City Royals to cross the state border from Missouri into Kansas.
Another interesting aspect of the tax revenue allocation of Kansas sports betting is that it’s dedicating $750,000 annually to its White Collar Crime Fund. After that $750,000 and the 2% dedicated to the Problem Gambling and Addiction Grant Fund, 80% of the remaining tax revenue goes to the Attracting Professional Sports to Kansas Fund. The other 20% goes to the lottery operating fund.
Maine
Maine uses a small portion of its sports betting tax revenue to support its agricultural economy. It allocates 0.40% of its sports betting tax revenue to its Agricultural Fair Promotion Fund, which provides financial support to the 501(c)3 nonprofit organizations in the state whose sole or primary purpose is supporting agricultural fairs in the state.
Michigan
The majority of revenue from Michigan sports betting goes to its School Aid Fund, but the state is also providing $2 million annually to help firefighters undergoing cancer treatments.
North Carolina
North Carolina provides a significant chunk of its sports betting tax revenue to support the athletic departments of 13 public universities in the state. Each university receives a flat contribution of $300,000, plus an equal share of 20% of the state’s remaining tax revenue after all other recipients receive their contributions. In 2024, after only about four months of legalized sports betting, those 13 universities received a total of $10.7 million (approximately $820,000 per school).
The 13 schools that receive those funds are Appalachian State University, East Carolina University, Elizabeth City State University, Fayetteville State University, North Carolina A&T, N.C. Central, UNC Asheville, UNC Charlotte, UNC Greensboro, UNC Pembroke, UNC Wilmington, Western Carolina University and Winston-Salem State University. Two schools notably missing from that list are UNC Chapel Hill and N.C. State University. Those big conference schools generate significantly more athletics revenue than their smaller counterparts in North Carolina.
Other recipients of tax revenue from North Carolina sports betting include the North Carolina Amateur Sports program, which provides grants to youth sports programs; the North Carolina Youth Outdoor Engagement Commission, which provides grants to support outdoor programs for children; and the North Carolina Major Events, Games, and Attractions Fund, which provides grants to promote travel and tourism in the state.