Lawmakers Target “Outdated” Excise Tax That Favors Illegal Operators
Congressional Gaming Caucus leaders have launched a renewed effort to abolish the federal excise tax on sports wagers, arguing that the seven-decade-old levy hampers legitimate businesses while giving illegal bookmakers an unfair advantage.
Representatives Dina Titus (D-Nevada) and Guy Reschenthaler (R-Pennsylvania) recently introduced the Discriminatory Gaming Tax Repeal Act of 2025, which would eliminate both the 0.25% handle tax on legal sports bets and the $50 annual tax imposed on sportsbook employees.
“The current tax structure creates an uneven playing field,” said Rep. Titus. “When I questioned the IRS about where this tax revenue goes in the federal budget, they couldn’t provide an answer. We’re maintaining a tax that federal authorities don’t even track, while simultaneously giving illegal operators a competitive edge.”
The Economic Impact of Sports Betting Taxation
The financial implications of the current tax system are particularly evident during major sporting events. During March Madness 2025, Americans are projected to wager $3.1 billion on tournament games, representing a substantial increase from previous years.
In states with legalized sports betting, the tax burden is significant:
- Nevada’s 66 licensed sportsbooks processed $8.26 billion in wagers in 2023, generating $481.3 million in revenue and $32.5 million in state tax contributions
- New York operators handled $19.18 billion in bets in 2024, producing $1.7 billion in gross revenue and $862.6 million in state taxes
- Pennsylvania, as the fifth-largest sports betting market, could have saved approximately $21 million in 2024 alone if the federal tax were eliminated
Historical Context and Legislative Challenges
The federal excise tax was originally implemented in 1951 to combat illegal gambling operations. However, following the Supreme Court’s 2018 decision allowing states to legalize sports betting, industry advocates argue the tax has become obsolete.
This marks the fourth attempt by Titus and Reschenthaler to advance similar legislation, with previous bills introduced in 2019, 2021, and 2023. Despite growing bipartisan support and backing from the American Gaming Association, previous efforts have stalled in House committees.
“Unfortunately, outdated tax codes and burdensome regulations penalize legal operators and incentivize illegal activity,” Reschenthaler noted. “Our bill ensures the gaming industry can continue supporting good-paying jobs and driving economic growth nationwide.”
As the legal sports betting landscape continues to evolve across 38 states and Washington D.C., pressure mounts to modernize federal tax policies that many view as impediments to the industry’s legitimate development and competitiveness against unregulated markets.
