Sports Betting State Taxes: “Free Play” Deductions Explained

Once the Supreme Court struck down a law banning sports betting in 2018, many states eagerly approved sports wagering and estimated robust tax revenue collections. States have experienced healthy returns, as sportsbook gaming revenue totaled nearly $9.4 billion in 2021 through November, according to recent industry tracking. But some have realized they might be leaving some money on the table as the industry grows.

Sports betting platforms such as FanDuel, DraftKings, Caesars, and BetMGM commonly offer users free bets or credits, also known as “free play,” to attract new customers. These promotional bets can account for ...