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Higher taxes on sportsbook revenue generally reduce advertising and sign-up bonuses rather than raise the prices bettors pay, according to research described in Chicago Booth Review. The findings distinguish revenue-based taxes from taxes on individual wagers, which operators have passed along through fees.
The report covers research by Matthew Brown and Jeffrey Ohl, with examples from New York and Illinois. It reports no West Virginia-specific tax change or player impact.
Revenue taxes had limited effects on betting prices
An ad valorem tax on sportsbook revenue charges operators a percentage of that revenue. At a 20% rate, for example, a sportsbook would owe $2 in tax on $10 of revenue—not on every $10 wagered.
According to Chicago Booth Review, the researchers found sportsbooks set the same odds for a given event across states, regardless of differences in tax rates.
New York provided a test of how operators responded to a substantial tax burden. Its 51% rate in 2022 increased the dollar-weighted national tax rate for DraftKings and FanDuel by nearly nine percentage points. Neither company raised betting prices enough to preserve its previous margin.
That finding does not mean taxes leave the customer experience unchanged. The research identified changes in how sportsbooks promoted their products and attracted customers.
Advertising and sign-up bonuses absorbed the pressure
After Illinois raised its sportsbook revenue tax rate by 14 percentage points in 2024, local television advertising in Chicago fell by roughly 32% relative to comparable markets.
Across states, each one-percentage-point increase in tax was associated with roughly 2% less sportsbook advertising. Operators also offered less generous sign-up bonuses in higher-tax states.
The researchers’ analysis of areas near neighboring television-market boundaries found that fewer ads led to less betting. Those results suggest advertising reductions were more than a change in operators’ spending: they also affected gambling activity.
Per-wager taxes create a different tradeoff
The researchers concluded that revenue-based taxes are relatively efficient and a net positive for society under their assumptions. But the report notes an important limitation: if gambling-related social harms are much larger than assumed, taxing wagers themselves could be more efficient.
Illinois introduced a per-wager tax in 2025, and sportsbooks passed the cost along, often through an add-on fee.
For players, the distinction is between a tax associated with reduced promotions and one that can produce a direct charge. The research does not establish a new West Virginia policy or announce any change to local sportsbook fees, odds or bonuses.
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Source: As reported by chicagobooth.edu.
