Massachusetts Sports Betting Tax Rate Won't Increase

It’s official: There will be no Massachusetts sports betting tax rate increase this year.

That sound you hear is the collective cheering from all of the top online sportsbooks in the United States. They just saved a boatload of money. The proposed hike would have increased the Bay State sports betting tax by more than 100 percent.

Currently, sportsbooks in Massachusetts are taxed at a 20 percent clip. If a recent initiative had passed, that tax rate would have ascended to 51 percent. That would have tied sports betting in New York for the highest rate in the United States.

This outcome is not totally unexpected. But it does come at a time when numerous states are contemplating tax hikes for sportsbooks.

So why didn’t Massachusetts sports betting regulators approve the increase? Is anything specific behind the rise in overall interest when it comes to raising taxes for sportsbooks in the USA? Strap in, folks. We’re about to cover it all.

Why Wasn’t the Massachusetts Sports Betting Tax Increase Successful?

Pat Evans of Legal Sports Report has the details on what unfolded in Massachusetts:

“During Massachusetts Senate budget discussions, Sen. John Keenan proposed an amendment to more than double the MA sports betting tax rate. The amendment, OTH 828, was filed Wednesday. The Senate rejected the amendment as it works to finish the FY 2025 budget…Earlier this year, Massachusetts collected more than $108 million in sports betting taxes during its first year. That was nearly double the tax revenue lawmakers projected as they legalized the industry. That came from $542 million in taxable sports betting revenue.”

Timing and expectations appear to be the driving forces behind OTH 828’s failure. For starters, it seems like it was filed too late into the process. The Senate was looking to finalize 2025 budget plans before this amendment ever came in.

Beyond that, the launch of Massachusetts sports betting is barely one year old. It rolled out in January 2023. Other officials might want to give online sportsbooks in Massachusetts a longer rope before hiking taxes. Policymakers could also just be happy with the early results.

As Evans noted, Massachusetts sports betting revenue obliterated expectations in Year 1. Increasing tax rates should theoretically add to that total. But it could also compromise it if Massachusetts sportsbooks begin pulling out of the market or passing additional costs onto customers with fees and fewer bonuses, all of which would dissuade the volume at which residents are wagering.

Other States Consider Raising Sports Gambling Taxes

Massachusetts is not the only state that has considered increasing their sports betting taxes. A bill that will raise the Illinois sports betting tax was recently approved and is expected to take effect. Sportsbooks in the Prairie State will now see their tax rate rise from 15 percent to 35 percent.

For their part, Illinois was following the lead of Ohio sports betting. Governor Ron DeWine signed a bill that will raise the Buckeye State’s sports gambling tax from 10 percent to 20 percent.

Even more recently, New Jersey Senator John McKeon proposed a New Jersey sports betting tax hike this past spring. The legislation is still pending and would basically double the state’s gambling tax rate, bumping it from 13 percent (online sports betting) and 15 percent (online casino gaming).

The list won’t stop here. Not even close. Other markets are going to follow suit.

That’s the natural progression of the industry. The novelty of sports betting in the United States is wearing off. No longer is it an anomaly. Instead, it’s ingrained into the fabric of society.

Thirty-eight of 50 states now offer some form of legalized sports betting. The push to raise tax rates will inevitably spread. And while the reasons will vary, two stand out from the rest: First and foremost, sports betting revenue in the United States has largely exceeded expectations. This holds true for Massachusetts sports betting. Officials, in turn, will believe sportsbooks have profit to be spare.

Secondly, states will want to nudge up and stabilize future budgets. Increases to sports betting taxes represent a means of doing that. Especially as state betting handles potential fall or level off following the initial boon from welcome bonuses around launch periods.

Expect Sportsbooks to Battle Against Increasing Tax Rates

Sportsbook responses are another moving element to tax increases. They are going to push back against them, fiercely and publicly.

You better believe, for instance, that the Sports Betting Alliance (SBA0, which works with a number of the top USA sportsbooks, would have fought a Massachusetts sports betting tax hike. The SBA most recently was extremely vocal about the increase in Illinois.

“‘SBA companies entered in Illinois with the understanding they would be operating under a 15% tax rate. All of them are currently operating in the red, but are still investing in the state based off long-term potential under a 15% tax rate,’ SBA spokesperson Nathan Click told Legal Sports Report. “Doubling the tax rate massively, that changes the calculus — and basically makes these investments exceedingly harder to recoup — much less turn a profit. The state taxes promos, so operators’ effective tax rate is actually between 30%-60%.”

Of course, not all markets will unfold like Illinois’ situation. (Also: Not every state assesses tax promotional sportsbook offerings.) The Massachusetts sports betting vote is the perfect proof. The Bay State is a market that has leverage over sportsbooks, and even they opted against charging higher fees. On some level, the potential response from operators had to factor in.

This doesn’t mean Massachusetts will never raise the sports betting tax. They could revisit the issue over time. However, it’s very rare that this transition takes place following the first year of operations. Expect this to be a topic that lingers. And while sportsbooks will argue against increases no matter what, they may become easier to implement over the bigger picture.

Take a look at this list of the top online sportsbooks so you can find one that works for all of your sports betting needs: