Published on: September 20, 2025, 10:40 AM.
Updated on: September 20, 2025, 10:40 AM.
- The impact of high taxes on online sportsbooks may be driving bettors to illegal options
- A consumer advocacy organization is urging state legislators to halt increases in online sports betting taxes
As the popularity of legal sports betting continues to surge across the United States, state lawmakers are eager to capitalize through escalating taxes. According to a leading consumer advocacy organization, constant tax increases may be pushing some bettors back into the shadows of the black market.
In a recent op-ed featured in The Hill, Justin Leventhal, a senior economist at the American Consumer Institute, argues that the exorbitant tax rates imposed on online sportsbooks significantly disadvantage consumers. He notes that in the 33 states and Washington, DC, where online betting is permitted, regulated sportsbooks transfer their tax burdens to gamblers, resulting in lower odds compared to their unregulated counterparts. Additionally, those sportsbooks have curtailed promotional offerings.
“If adults wish to gamble, they should be able to do so without burdensome tax policies that increase costs and entice bettors back to the black market,” Leventhal remarked.
“Implementing a fair, stable tax framework provides certainty for operators, encourages competitive practices, and allows consumers to enjoy better odds and reduced costs. This approach would also generate reliable state revenue without nudging bettors toward unregulated offshore platforms where fraud is prevalent,” Leventhal elaborated.
Increased Sports Betting Taxes
Leventhal’s commentary emerges soon after Illinois enacted a second tax hike on online sportsbooks within a year.
In 2024, Illinois introduced a graduated tax system, raising the effective rate for market leader FanDuel from 15% to 40%. Additionally, earlier this year, Illinois lawmakers added a per-bet fee of 20 cents, escalating to 50 cents for each bet beyond 20 million in a single year.
Similarly, New Jersey increased its online sports betting tax effective June, demanding that sportsbooks allocate 19.75% of their net winnings to the state. This raised the previous rate from 15%, and at the outset of sports betting legalization, only 13% went to the state.
Louisiana also adjusted its sports betting taxation from 15% to 21.5%, effective August 1.
Gaming experts have advised investors that the majority of online sportsbook operations will likely cut back on promotions to balance the impact of increased taxes. While this may be a boon for shareholders, it’s certainly not in the best interest of consumers.
Mixed Outcomes
In Illinois, the rise in taxes on online sports betting hasn’t yet prompted a significant shift back to illegal offshore sites. The total money wagered (handle) in online sports betting ascended from $7.14 billion in the first seven months of 2024 to $8.25 billion in the same period of 2025, marking a robust 15.5% year-over-year increase.
Conversely, New Jersey is witnessing a different trend.
By August, online sportsbooks in New Jersey had processed $7.2 billion in wagers, down from over $7.82 billion at this point last year, a shortfall exceeding $616.1 million. New York’s online betting marketplace opened its doors in January 2022.
“If bettors feel overburdened by unfavorable odds, excessive fees, and diminishing rewards, they might revert to unregulated platforms devoid of stringent laws,” Leventhal cautioned. “Returning to the illegal market not only jeopardizes consumer safeguards but also impacts state income, ultimately undermining the very aim of legalization.”
The American Consumer Institute is devoted to advancing consumer welfare through education and informed public policy.