North Carolina lawmakers are considering an increase in the state’s sports betting tax rate as part of ongoing budget negotiations, following stronger-than-expected revenue collections since online wagering launched in March 2024.

The state currently taxes gross wagering revenue at 18% across eight licensed sports betting operators. Since legalization, the market has generated more than $287 million in tax revenue, surpassing initial forecasts.

According to a report by WRAL, legislators have discussed raising the tax rate paid by operators. House budget writer Donny Lambeth confirmed last week that lawmakers in both chambers had agreed to pursue an increase, though he did not disclose details.

Sources familiar with the negotiations previously told WRAL that discussions focused on a rate between 20% and 30%. More recently, sources indicated that lawmakers reached a tentative agreement last month on a figure near the lower end of that range. The sources spoke on condition of anonymity because they were not authorized to discuss the negotiations publicly.

The proposal remains subject to change as lawmakers continue work on the state’s overall spending plan and consider feedback from industry stakeholders.

Revenue growth draws legislative attention

North Carolina’s sports betting tax rate currently sits between neighboring states and some of the country’s highest-tax jurisdictions. Tennessee taxes sports betting revenue at 19.7%, while Virginia applies a 15% rate. Several states, including New York, impose a 51% tax.

Including promotional and bonus wagers, bettors in North Carolina have placed more than $15.3 billion in bets since legal wagering began in March 2024.

House Speaker Destin Hall said lawmakers are evaluating how the state’s tax structure compares with other jurisdictions while considering changes to a system that has generated substantial revenue.

“It’s been a tremendously successful policy in this state,” Hall said. “A lot of people apparently like to do that sort of thing for one reason or another. Got a lot of revenue to the state. I think, on our side of the building, it’s more so looking at, ‘How do we line up with other states?’ We want to be on the average of what other states are doing on a lot of these rates. A lot of the ideas are out there. I think we’re somewhat hesitant to tweak too much a program that’s worked pretty well for the state all things considered.”

Last year, the state Senate approved a budget proposal that would have raised the sports betting tax rate to 36%, while the House version retained the existing 18% rate.

Lawmakers have also examined proposals involving additional taxes on lottery sales and individual wagers. However, those options could face operational challenges and resistance from bettors. Raising taxes on operators is viewed by some lawmakers as a more straightforward approach.

Industry pushes back on proposed changes

The prospect of higher taxes has already drawn opposition from the sports betting sector. The Sports Betting Alliance, which represents sportsbook operators, launched a campaign encouraging residents to contact legislators regarding potential tax increases.

Operators argue that higher taxes could reduce funding available to recipients of gambling-related revenue. They also contend that increased tax burdens may result in less favorable odds, fewer promotional offers and greater consumer interest in unregulated betting options.

“This tax hike will only penalize licensed, regulated companies who have delivered hundreds of millions in tax revenue to the state and the UNC System athletic departments,” the Sports Betting Alliance said in a statement. “We urge state leaders to instead focus on strengthening the legal framework that protects players, supports jobs, and keeps illegal and unregulated operators out of North Carolina.”

Distribution formula could change

The allocation of sports betting tax revenue is also part of current budget discussions.

While 13 universities within the University of North Carolina system that operate intercollegiate athletics programs have each received more than $4.3 million from sports betting tax proceeds, the state’s two largest public athletic programs — the University of North Carolina and North Carolina State University — currently do not receive funding from that source.

Both institutions have sought a share of the revenue, arguing that betting activity involving their teams exceeds that of schools currently receiving distributions.

Last year, both the House and Senate included provisions in their budget proposals to add UNC and NC State to the distribution formula. Lawmakers reached a preliminary agreement last month that would allow both universities to receive funding, potentially at levels comparable to other eligible schools.

A comprehensive state budget agreement is expected in the coming weeks.

Hall and Senate leader Phil Berger previously announced progress on several major budget issues, including pay increases for teachers and state employees. Lawmakers aim to finalize the budget before the new fiscal year begins on July 1.

An upward revision to state revenue forecasts last month may ease pressure to identify additional funding sources.

Beyond sports betting, lawmakers are evaluating other measures that could affect state finances. Discussions have included reducing the state income tax rate from 3.99% to 2.99% by 2033, closing tax exemptions for data centers and nonprofit organizations, and revisiting funding allocated to NCInnovation, a public-private initiative focused on commercializing university research.

Additional proposals under discussion include a state-level version of a “no tax on tips” policy. The House budget proposal would exempt the first $5,000 in tips from taxation, while the Senate has not included a similar measure.

“There are ongoing conversations about whether or not, at the state level, something in that kind of area, that idea, would be part of the budget,” Berger said. “No decision has been made as of yet.”