In a significant legislative development, Senators Catherine Cortez Masto of Nevada and Cindy Hyde-Smith of Mississippi have introduced a new bill aiming to repeal the longstanding 0.25% federal excise tax on sports betting handle.
This bipartisan effort is backed by a coalition of lawmakers from both parties and chambers, marking a renewed push to eliminate a tax many see as outdated and detrimental to the legal sports betting industry. The proposed legislation, known as the Withdrawing Arduous Gaming Excise Rates (WAGER) Act, seeks to align with an existing bill in the House authored by Representatives Dina Titus and Guy Reschenthaler.
The Push for Repeal
Senator Cortez Masto emphasized the importance of removing the federal excise tax, citing Nevada’s thriving sports betting industry as a model for how legal gambling can significantly benefit local economies. “Nevada is home to multiple championship-level sports teams, and we know better than anyone that responsible, legal sports betting can be a great revenue source for our local economy,” said Cortez Masto. “My bipartisan legislation will ensure our sports gaming industry can provide essential tax relief to consumers and our sports gaming industry, creating more jobs and keeping our tax money in the state while cracking down on illegal activities.”
Senator Hyde-Smith echoed these sentiments, highlighting the negative impact of the tax on Mississippi’s tourism-driven economy. “Mississippi has a strong tourism industry thanks, in part, to our beautiful casinos and resorts that make valuable contributions to local communities. They could do more if not for this outdated federal excise tax on sports betting that only benefits illegal offshore operations which provide zero jobs or tax revenue,” Hyde-Smith stated. “By repealing this tax, our bipartisan WAGER Act will level the playing field, boost local economies, and ensure that gaming revenues stay here, supporting jobs and community investments.”
Industry Support and Opposition
The American Gaming Association (AGA), a major trade group representing the gaming industry, has expressed strong support for the WAGER Act [pdf]. The AGA argues that the excise tax, initially established over 70 years ago to combat illegal gambling operations, now places legal operators at a competitive disadvantage. “The AGA is grateful to Senators Cortez Masto and Hyde-Smith for their commitment to providing a safe, responsible sports betting market and to continuing to help migrate bettors out of the illegal market, which is bereft of consumer protections and a haven for bad actors and tax evaders,” commented Bill Miller, CEO and President of the AGA. “The AGA will continue to work with policymakers to enact legislation to address this harmful tax.”
Industry insiders have long criticized the excise tax as an unnecessary burden on legal operators, who are already subject to state regulations and taxes. Brandt Iden, Vice President of Government Affairs at Fanatics Betting & Gaming, stated, “This tax has always penalised regulated operators and rewarded illegal operators who prey on consumers. Repealing this tax is one more step in the fight against the offshore market.”
Competing Legislation
While the WAGER Act has garnered considerable support, it faces competition from another piece of legislation introduced earlier this year. The Gambling Addiction Recovery, Investment, and Treatment (GRIT) Act, proposed by Senator Richard Blumenthal and Representative Andrea Salinas, seeks to maintain the excise tax but redirect its revenue towards responsible gambling initiatives and problem gambling treatment. This bill aims to leverage federal oversight to enhance responsible gambling efforts across the nation, in contrast to the state-level approaches currently in place.
Proponents of the GRIT Act argue that federal involvement is necessary to ensure consistent support for gambling addiction programs. However, opponents believe that the responsibility should remain with individual states, which have their own funding mechanisms for responsible gambling initiatives.
The Road Ahead
The debate over the federal excise tax highlights broader questions about the role of federal oversight in the rapidly evolving landscape of sports betting and iGaming. Since the repeal of PASPA in 2018, sports betting has become a significant industry, with 38 states and Washington, D.C., now offering legal wagering. The push for repeal reflects a growing recognition that state-level regulation is sufficient and that federal taxes may impede the industry’s growth and innovation.
The current excise tax, which amounts to approximately an additional 5% tax on gross gaming revenue, is seen by many as an unnecessary hindrance. Brendan Bussmann, a consultant in the gaming industry, noted, “By eliminating the excise tax, we can help lower the tax burden that every sports betting operator pays. It helps create a more competitive market against the illegal operators that do not pay state or federal taxes.”
In addition to the excise tax on wagers, the federal law also includes a $50 “head tax” on gambling employees, further complicating the financial landscape for legal operators.
Source:
Bill to repeal US gambling excise tax filed, igamingbusiness.com, July 31, 2024.