Senate Passes Bill with North Carolina Sports Betting Tax Hike

Less than two years after its launch, North Carolina sports betting may soon feature higher taxes for its operators.

Just before May, Senate members from The Tar Heel State approved a two-year budget proposal. As part of the measure, online sportsbooks in North Carolina would see the fees assessed to their revenue increase by a substantial margin. 

In fact, this may be putting the terms conservatively. As of now, North Carolina sports betting online operators pay an 18 percent tax. The new budget seeks to double that—to 36 percent.   

The reaction to this hike is mixed, as expected. And just because the Senate approved it, that doesn’t mean it will be ratified. The North Carolina House of Representatives will now have their says. 

Will they support it? What do North Carolina online sportsbooks think of the potentially increasing overhead? And if successful, would this change impact how other states view their own sports betting tax rates?

Officials Looking to Allocate MOre North Carolina Sports Betting Tax Allocation to School Systems

Sports betting tax hikes are not uncommon. (More on this shortly.) The most successful proposals, though, have two prevailing characteristics: alignment among government officials, and a clear blueprint for how the additional funds will be used.

In the case of the North Carolina sports betting tax hike, both boxes appear to be getting checked. Here is Pat Evans of Legal Sports Report with more:

“North Carolina online operators launched in March 2024. Since then, the sportsbooks have generated more than $751 million in sports betting revenue, contributing $135 million to the state.The eight NC sportsbooks would have effectively doubled that number with the proposed tax jump. If passed, the new tax rate would go into effect in October. The extra taxes would increase the amount of money going to UNC System schools, including adding the University of North Carolina and NC State to the list of payees, as long as they meet a provision to play basketball games against the other in-state schools.”

Regardless of the outcome, the tax hike’s framing is pretty adept. It isn’t hard to win the perception battle when charging sports betting operators more money to work within your market. But emphasizing how the money will be used to enhance the school system curries favor among lawmakers and their constituents alike.

To that end, it will be fairly surprising if the House does not green light the proposal. The real question: How will sportsbooks react?

Expect North Carolina Sportsbooks to Push Back

As Evans notes, the new budget would have North Carolina online sportsbooks contributing twice as much money to the state. Doubling up is a lot in a vacuum. It sounds like even more when portrayed in actual numbers.

If sportsbooks paid $135 million to North Carolina last year, that is the equivalent of $270 million under the new budget. That isn’t money these operators will part with voluntarily. They will push back against the proposal.

Granted, their power in the matter is limited. They can threaten to leave the market, but as those figures show, they’d be walking away from a bunch of money. Put in Layman’s terms: Sixty-four percent of something is better than 100 percent of nothing.

Indeed, the 36 percent tax rate could prove prohibitive for operators with smaller market shares. It is a drop in the bucket for most, though. Remember, the rise of popularity for online sports betting in the United States has shown no signs of slowing. And North Carolina is a fairly lucrative market, thanks to having pro sports franchises across the NFL, NBA and NHL.

According to RG.org, in fact, North Carolina posted a higher gross gaming revenue per capita in 2024 than similar states such as Pennsylvania and Michigan. That’s a big deal. Especially when sports betting in Pennsylvania and sports betting in Michigan are far more established markets. They both launched their operations years earlier. 

Now, sportsbooks could threaten to pass on the added expenses to consumers. This would be done by futzing with odds markets, or charging customers higher or extra fees. But companies have discussed this in other markets only to pull back after seeing the public’s response. Essentially, we’d assume North Carolina sportsbooks accept a tax hike if the House approves it.

Sports Betting Tax Rates in the United States are on the Rise

The North Carolina sports betting market is far from the only one to explore tax increases. Sure, this is somewhat unique because they launched barely a year ago. But the past couple of fiscal quarters have seen states refocus energy on stricter sports betting regulations, as well as higher tax rates. 

Heck, the Ohio sports betting market just tried to double-up the tax rate from 20 to 40 percent after doubling it from 10 to 20 percent not too long ago. (That attempt has since failed.) The Maryland sports betting market tried the same, aiming for a 30 percent tax rate, up from 15 percent. They ultimately settled on an increase of 5 percent. 

On top of that, New Jersey, Louisiana, Massachusetts, Michigan and Illinois have all recently discussed (or actually raised) their sports betting taxes. These attempts have not all been successful. But they are growing in number—and conversion. That bodes well for North Carolina’s proposal. It is also something sports betting operators will have to grapple with moving forward.

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: