The legal sports betting industry dodged a tax-related bullet on Thursday, as an attempt to hike a levy on bookmakers in the Bay State was shot down despite passionate rhetoric from one lawmaker.
Democratic Sen. John Keenan proposed Massachusetts increase its tax for online sports betting revenue to 51% from its current 20%, which would have made Massachusetts one of the costliest jurisdictions in the U.S. for operators.
Keenan made a case for the tax hike that went beyond just the financial aspect, including his concerns about the mental health of commonwealth residents and the harassment of athletes.
"The public harm issues are going to get so far ahead of us unless we act," Keenan said in the state Senate. "And we have an obligation to all the residents and taxpayers of the commonwealth of Massachusetts to use whatever revenues we can from the industry to prevent the harms from happening."
However, mere seconds after Keenan finished his remarks, the Senate rejected his proposed amendment, which was one of more than a thousand put forward for the budget bill covering the 2025 fiscal year.
That means, for the time being, operators offering online sports betting in Massachusetts will still be taxed at a 20% rate, not the New York-like level that Keenan sought.
One of many
Even so, the latest proposal continues a trend of states looking at whether to revise their financial arrangements with sportsbook operators after the launch of legal wagering has already occurred.
Ohio doubled its tax rate for sportsbook operators to 20% last year, and lawmakers in Illinois, New Jersey, and Washington, D.C., are mulling increases as well.
In Illinois, the industry is pushing back. The Sports Betting Alliance, the members of which are BetMGM, DraftKings, FanDuel, and Fanatics, is leading a charge to beat back a proposal to hike the state’s sports wagering tax to 35% from 15%.
'The crack cocaine of betting'
Keenan made a passionate, albeit ultimately failed, pitch for changes to sports betting regulation in Massachusetts.
In addition to seeking more money from operators to help fund responsible and problem gambling help, he took aim at player prop and in-game wagering, which he argued should not be allowed in the state.
"Those in-game bets have been described to me by somebody who had a real issue with gambling, true addiction to the point of suicide, 'That's the crack cocaine of betting,'" Keenan said.
The senator also noted the absence of most sportsbook operators from the roundtable on limiting bettors earlier this week that was hosted by the Massachusetts Gaming Commission.
"Basically, they thumbed their nose at the gaming commission," he said. "That's the industry that we're dealing [with] here in Massachusetts, an industry that is making far more money than they ever expected, and far more money than we expected them to make at this point."
Tax hike FOMO?
Keenan's proposal was rejected, but an increased cost of doing business for sportsbook operators in certain states could ultimately be felt by bettors who wind up getting worse odds. Some bookmakers may decide to avoid or exit more expensive states entirely.
Still, state lawmakers continue to consider ratcheting up tax rates, and they could do so in additional jurisdictions. Deutsche Bank analyst Carlo Santarelli recently cited the "regulatory environment" as a headwind in a research note for DraftKings.
Santarelli warned that "much like was the case when the dominoes began to fall with [online sports betting] legalization on a state by state basis, and neighboring FOMO pushed further legislation and further expansion, ignoring the tax rate increase proposals currently out there, or viewing them as isolated instances, is likely to prove shortsighted."
