States bet on boosting taxes for online sports betting companies like DraftKings, FanDuel

abcnews.go.com:

States are looking to increase their take from the $16 billion online sports gambling industry as it expands across the country with big partnerships

NEW YORK — States are looking to increase their take from the $16 billion online sports gambling industry as it expands across the country with big partnerships.

DraftKings, FanDuel and other betting apps are facing a bigger tax hit in Illinois following changes to tax policy this year. New Jersey, Massachusetts and other states have also tried to raise taxes on the industry or plan to.

DraftKings and FanDuel count Major League Baseball and the National Football League among their biggest partnerships. ESPN owner Walt Disney Co. has also gotten involved in the action with ESPN Bet, which has a partnership with the National Hockey League. Established casino operators like MGM Resorts and Penn Entertainment have also expanded into online sports gambling.

All sports wagering revenue in the U.S. jumped 22% to $3.33 billion in the first quarter of 2024, according to the American Gaming Association. The industry's growth has piqued the interest of state governments.

Illinois this month switched from a flat 15% tax on adjusted gross revenue for online sports betting companies to a new progressive rate ranging from 20% to 40%. The state legalized sports gambling in 2019 and last year it earned just over $1.5 billion in tax revenue from online sports betting operations and casinos. By comparison, the state lottery, which started operating in 1974, had revenue of about $2.32 billion in 2023.

The new policy puts Illinois’ top tax rate for online sports gambling operations in the same league as New York, which has a 51% top rate. New Jersey is considering doubling its tax rate to 30%.