Washington is eyeing up the sports betting boom with fresh interest, and the numbers being discussed are substantial. A proposed 10% federal tax on sports wagers could generate $182 billion between 2027 and 2036, according to recent Budget Lab estimates. Serious money, even by government standards.

The context matters here. Since the Supreme Court opened the door in 2018, legal sports betting has exploded from $7 billion to $167 billion last year. Nearly all of it now happens on mobile apps, a shift that’s made betting faster, easier, and far more accessible than the old casino sportsbook model.

Current Tax Structure Is Decades Old

Right now, the federal government takes a tiny 0.25% cut of each wager. That rate hasn’t budged in years. It’s starting to look out of step with the industry’s growth. States are collecting meaningful tax revenue from betting, using it to prop up public budgets. Federal lawmakers reckon they should get a bigger slice.

The proposals being floated range from modest to aggressive. A 5% tax would bring in roughly $100 billion over ten years. Push it to 10%, and you’re looking at $182 billion, though the Budget Lab reckons that would also reduce betting volumes by 10%. There’s even a flat $0.05 per transaction option on the table, expected to raise $1.3 billion but potentially have a longer-term dampening effect on bet volumes.

The Trade-Offs Are Real

Supporters argue sports betting should face similar tax treatment to alcohol or tobacco. A vice tax, essentially. Meant to generate revenue while possibly curbing excessive behaviour. Given how embedded gambling has become in sports culture, there’s a case for treating it accordingly.

Here’s the rub, though. Push taxes too high, and you risk driving punters toward unregulated offshore sites and informal betting networks. Those operators don’t care about consumer protections or tax compliance. They’re already there, waiting in the wings. Make legal betting less attractive, and you hand them customers on a plate.

States are nervous too. Many have built betting revenue into their budgets. A sharp federal tax increase could reduce overall betting activity, cutting into state coffers just as they’ve gotten comfortable with the income stream. That’s not going to go down well.

Tax Rules Tightening for Bettors

There’s another wrinkle coming in 2026. Gamblers will no longer be able to fully offset losses against winnings when filing taxes. That means you could end the year breaking even overall but still owe tax on your winning sessions. A significant change that’ll catch plenty of casual bettors off guard.

The broader question is how Washington approaches this industry going forward. Sports betting isn’t going anywhere. It’s woven into how millions experience sport now. The challenge is finding a tax and regulatory framework that captures revenue without strangling the legal market or pushing activity underground.

For now, it’s all proposals and projections. But with $182 billion on the table, expect this debate to heat up considerably over the coming months.

What the team thinks

Sheena McAllister says:

While $182 billion sounds impressive on paper, Washington needs to look across the Atlantic at how punitive taxation actually works in practice. We’ve seen in the UK that sustainable tax structures around 15% of gross gaming revenue support both robust consumer protections and a thriving licensed market, whereas excessive taxation simply drives punters toward unregulated offshore operators where there’s zero consumer protection or tax revenue. The real question isn’t how much revenue a 10% tax could theoretically generate, but whether it creates the right conditions for operators to invest in compliance, responsible gambling measures, and keeping customers within the regulated framework.