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Leading U.S. operators are going to the mattresses for a multi-state fight against proposals to increase taxes on mobile sports betting.

Within the first few weeks of 2025, the governors of two major sports-betting markets have proposed to double their tax rates, escalating one of the industry’s most closely watched policy trends.

Earlier this month, Ohio Governor Mike DeWine released a state budget plan that proposed raising taxes on sports-betting revenue to 40 percent, doubling them for the second time in just three years.

The governor is aiming to use the increased tax revenue to support the funding of new professional sports stadiums and said it would be justified because “Ohio citizens are giving, every single day, millions of dollars to the sports gaming companies”.

DeWine’s move came after Maryland Governor Wes Moore also proposed doubling his state’s tax rate to 30 percent, again as part of a broader budget package.

Industry observers have been asking whether tax increases will become a wider problem ever since Illinois hiked its tax rate on sports betting last spring, following DeWine’s and Ohio’s initial move a year earlier.

There are several factors driving the trend, according to Bob Stoddard, U.S. gaming tax lead and partner at KPMG.

They include an increasing number of states facing structural budget deficits following the end of federal COVID-19 relief programs and now having to consider new revenue sources in anticipation of lower federal outflows under the new Trump administration.

“I also don’t think it’s a coincidence that many states proposing tax-rate increases on OSB [online sports betting] and/or iGaming are directly adjacent or geographically close to New York and Pennsylvania, where the rates are already high,” Stoddard told ���ĺ������� GamblingCompliance.

“With total OSB handle continuing to grow in the larger states, I think some legislators continue to feel that tax-rate increases may not detrimentally affect overall handle and related [gross revenue] taxes are less controversial than other types of tax increases they might otherwise consider.”

Lobbying Pushback

Still, major operators are not sitting back and accepting an increased tax burden as an inevitable outcome in 2025.

Speaking with Wall Street analysts on Friday (February 14), DraftKings CEO Jason Robins said the company was not factoring in any tax increases for its forecasted annual earnings this year.

“Right now, there’s no reason to bake in higher tax rates because no state has actually increased our tax rate this year,” Robins said.

“Obviously, that’s something that could change and something that we are very focused on from a government affairs standpoint.”

In both Ohio and Maryland, the governor’s budget plans still have to be reviewed and approved by the state legislature, and there is some cause for optimism that the initial proposals will at least be diluted if not rejected altogether before budget laws are finalized ahead of the new fiscal year starting July 1.

At least one senior Ohio lawmaker — House finance committee chairman Brian Stewart — has publicly questioned whether DeWine’s fellow Republicans will support a second tax increase on sports betting in such quick succession, saying he expected a “skeptical eyebrow raise” in the legislature.

In Maryland, Bill Hornbuckle, the CEO of BetMGM co-owner MGM Resorts, last week said his company had met directly with Governor Moore about his budget proposal to increase taxes on both sports wagering and casinos’ table games.

Hornbuckle suggested that Moore had agreed to back down at least regarding casinos, although he was more circumspect over where things stand on mobile sports betting.

“As it relates to digital [gaming and sports betting], I think it's going to be an ongoing game,” Hornbuckle said of potential tax increases.

“I think there are markets that get it. There are markets that want to see true growth and keep it onshore versus offshore … and there’s a couple of states I think we'll continue to battle.”

All Eyes On Murphy's Budget Law

While there is a long way to go in Ohio and Maryland, it also seems unlikely they will be the only two states to consider tax increases this year.

Lawmakers in Indiana, Louisiana, Michigan and Massachusetts have all filed bills to raise sports-betting taxes in recent months, while it is at least theoretically possible that legislators will seek to add increases as amendments during the course of their state's budgetary process. 

A total of 47 states must pass a new budget law this year, with governors in 40 of them having already released their initial budget proposals, according to the Association of State Budget Officers.

One notable exception and an obvious state to watch is New Jersey, where Governor Phil Murphy was reported last week to be considering an increase to taxes on online gambling as one way of filling an estimated $3.7bn budget hole.

New Jersey’s governor, who will leave office this year, will release his 2025-26 budget plan on February 25.

DraftKings’ Robins described the current state of play as being the “sausage-making stage” of state legislative sessions.

“There’s a whole lot of things that happen between now and when ultimate decisions get made on which states want to move forward with new legislation or anything else … including tax decisions,” he told analysts.

“We’re obviously right in the thick of it with our lobbying team, trying to make sure that we’re getting our points made and that we’re helping push forward the policy that we believe is the correct policy, which is to have broad legalization with reasonable regulations and tax rates so that operators like us are able to compete with the ramp-up in the illegal market.”