North Carolina Compromises on Five-Point Tax Hike for Online Sportsbooks
North Carolina has settled on a 23% tax rate for online sports betting operators, up from the 18% rate in place since the market launched in March 2024.
Recent reports explain that the increase ends a debate that has run through two consecutive budget cycles, with the Senate previously proposing 36% last summer, before the House declined to act. This year, Sen. Jim Burgin said publicly he wanted 50%. The 23% figure represents a significant retreat from the more aggressive positions, though operators opposed even the modest increase.
The revenue math is straightforward. Under the 18% rate, North Carolina collected approximately $133 million in the 2025/26 fiscal year. At 23%, that figure would have been roughly $170 million, a difference of about $37 million annually at current handle levels. The state has been looking for revenue to fund a budget that includes meaningful raises for state employees, and sports betting offered a target that the industry had already proven it could absorb elsewhere. That last point is the part the operators would rather not discuss.
New York Set the Benchmark, and North Carolina is Comparing its Options
When New York launched online sports betting in January 2022, operators accepted a 51% tax on gross gaming revenue to gain access to the largest market in the country. The calculation at the time was defensible on its own terms: New York’s population and wealth density meant that even a 51% rate left enough revenue to justify the investment, and operators were also betting that iGaming legalization would follow, converting the sports-betting foothold into a broader market position.
That iGaming bet has not paid off in New York, which still has not legalized online casino gaming. Operators are sitting with 51% tax rates in the country’s biggest market without the iGaming upside they anticipated. But that is their problem to manage internally. The more immediate consequence was the data point it handed to every other state legislature in the country.
Before New York, operators consistently argued that tax rates above the low-to-mid teens were unsustainable, that higher rates would compress margins to the point of market exit, harm consumers by reducing odds and promotions, and push bettors toward illegal offshore sites. That argument had real merit at the time. It collapsed in practice the moment operators accepted 51% and stayed in New York anyway. House Speaker Destin Hall’s framing of North Carolina’s decision was explicitly comparative: “How do we line up with other states?” That is the question every state legislature is now asking, and New York is the answer that keeps coming up.
North Carolina Is the Middle of a National Pattern as Other States Continue to Adjust
The 23% rate puts North Carolina in the middle of an increasingly crowded tier of states that have raised rates after initially launching at lower figures. New York, New Hampshire, Rhode Island, and Oregon all sit at 50% or 51%. Illinois moved to a graduated scale reaching 40% in 2024 and then added a per-wager fee on top of that in 2025, the first state to implement such a surcharge. Massachusetts has also proposed a 51% tax with certain bet limits and VIP Program limits.
Virginia, Tennessee, and several other states remain in the low-to-mid twenties range. North Carolina’s sports betting taxes represent less than 1% of the state’s total budget, which both explains why the industry’s arguments about consumer harm get limited traction in the legislature and illustrates why the revenue is more politically attractive than economically meaningful.
The market itself has given operators limited leverage in the negotiation. North Carolina bettors have wagered more than $15 billion through legal sportsbooks since launch, generating over $1.6 billion in gross wagering revenue. A market that size is not easy for operators to walk away from, and legislators know it. The Sports Betting Alliance mounted a public campaign asking bettors to oppose the increase, warning that customers “would pay the price.” FanDuel sent operators an electronic letter to customers citing the tax’s impact on collegiate athletic departments that benefit from sports betting revenue. The final rate suggests the campaign had some effect: 23% is considerably below the 36% the Senate wanted last year, and the 50% wanted this cycle. But it did not hold the line at 18%.
It May Take an Operator Actually Exiting a Market Before the Tax Increase Conversations Stop
The deeper issue for operators is more structural. Every time a state raises its tax rate and operators stay in the market, the viability argument erodes further. Illinois moved to 40% plus a per-wager fee, and operators complained loudly but remained. The Illinois per-wager fee generated more than $5.2 million in its first month and over $11 million by March 2026, demonstrating that the market absorbed the additional burden without the mass market exit operators predicted. North Carolina watched that play out before settling on 23%.
There is a real floor somewhere. Operators are not bluffing when they say extremely high rates compress margins, reduce promotional spending, and make marginal markets economically questionable. The problem is that the industry has not established a credible position on where that floor is, partly because the New York concession made the original low-teens argument appear to be a negotiating posture rather than a genuine constraint.
What the industry needed from New York was a cautionary tale it could point to. What it got was a profitable market that validated 51%. Until an operator actually exits a major market because the tax rate made it unviable, the argument that any given increase is unsustainable will continue to meet with limited sympathy in state legislatures that are, in the end, just asking how they line up with other states.
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