Kansas lawmakers are reassessing the state’s revenue collection methods from sports gambling, with many expressing that the existing framework is insufficient. This week, the Special Committee on Federal and State Affairs convened to review Kansas’s 6.5 percent cut of sports betting revenue, one of the lowest rates nationwide.

When legislators authorized sports betting in 2022, they anticipated the state would earn a 10 percent tax on revenue. However, a clause permitting sportsbooks to subtract promotional credits has effectively lowered Kansas’s rate to 6.5 percent. This shortfall has resulted in reduced funding for state initiatives, despite a robust betting environment.

During fiscal year 2025, sports gambling generated $17.4 million for Kansas and, since its legalization, the total has exceeded $36 million. However, lawmakers point out that revenues could have been much higher if the state had collected the originally projected 10 percent. A significant portion of these funds is allocated to entice professional teams like the Royals and Chiefs.

Rep. Tom Kessler has raised concerns regarding Kansas’s revenue optimization. He suggested the state investigate “more effective strategies” that could enhance collections without hindering the industry.

Rep. Francis Awerkamp was notably blunt, describing the current system as an “utter failure.” He questioned whether Kansas should maintain multiple operators or transition to a single-operator model, akin to what Oregon has adopted.

Comparisons to other states have fueled the conversation. New York imposes a tax of 51 percent on sportsbooks, Pennsylvania follows with 36 percent, while even Missouri, which recently enacted sports betting, has established a 10 percent rate. Only Arizona and Michigan yield lesser revenue proportionately compared to Kansas, which ranks 29th out of 33 states in tax collections per $1 million bet.

A major contributing factor to the issue is the deductions sportsbooks claim for free bets and promotions. These credits, often provided to attract new users, diminish the taxable base and have cost the state millions in potential revenues. Legislators argue that removing or capping such deductions could enhance Kansas’s earnings without changing the tax rate.

The timing of this discussion is pivotal. The recent legalization of sports betting in Missouri is likely to decrease the influx of out-of-state wagers in Kansas. In 2024, nearly 37 percent of geolocation checks originated from Missouri residents trying to place bets in Kansas.

Proponents of reform believe Kansas could raise its rate to between 15 and 20 percent, with the extra funds designated for education, infrastructure, and healthcare. However, opponents warn that increased taxes might lead gamblers to unregulated markets, complicating oversight efforts.

At present, six firms—BetMGM, Caesars, DraftKings, ESPN BET, Fanatics, and FanDuel—operate in Kansas under contracts with the Kansas Lottery. These five-year agreements will expire in August 2027. A law passed earlier this year prevents the Lottery from negotiating renewals until mid-2026, providing lawmakers the opportunity to reassess the entire system.