New WAGER Act Reintroduced to Boost Sports Betting Industry by Repealing Federal Excise Tax

The reintroduction of the wager act could significantly boost the sports betting industry by repealing outdated federal taxes. In a significant move for the sports betting industry, United States Senators Catherine Cortez Masto (D-NV) and Cindy Hyde-Smith (R-MS) have reintroduced a bill aimed at lifting the federal government’s excise tax on sports wagers and eliminating the annual per-employee fee that sportsbooks are required to pay.

• The WAGER Act aims to abolish the federal excise tax on sports bets.
• Sens. Catherine Cortez Masto and Cindy Hyde-Smith are championing this legislative effort.
• Currently, legal sportsbooks in the U.S. are taxed at 0.25% on each bet placed.

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The WAGER (Withdrawing Arduous Gaming Excise Rates) Act seeks to exempt legal, regulated retail and online sportsbooks from a federal IRS regulation established back in 1951, which mandates a 0.25% tax on every bet they accept. The proposed legislation also aims to remove the $50 annual head tax imposed on each employee within the sports betting sector.

Senator Cortez Masto highlighted that, “In Nevada, legal sports betting is a booming industry that enhances the enjoyment of world-class professional sports. It’s high time we exempt legal sportsbooks from outdated taxes that actually encourage illegal operations to thrive.” Senator Hyde-Smith echoed these sentiments, noting that the current taxation regime impairs traditional casinos, especially along Mississippi’s Gulf Coast, giving an unfair advantage to illegal offshore operators.

Outdated Regulation

The original excise tax was introduced to fund federal initiatives targeting illegal betting operations, which were rampant in the 1950s and often linked to organised crime. Fast forward 74 years, the landscape has shifted significantly, especially following the US Supreme Court ruling that allowed states beyond Nevada to legalise sports betting.

Advocates argue that the outdated tax laws now contribute to the very problem they seek to address, as the costs associated with these taxes do not burden illegal bookies, who can undercut legal sportsbooks on odds and promotions.

Impact of the Taxes

A legal sportsbook like DraftKings must set aside 25 cents for the government for every $100 bet made. This may appear minimal, but the cumulative effect is profound. For instance, in New York alone, legal sports betting amassed $22.6 billion in bets last year, resulting in a hefty tax burden.

Overall, the American Gaming Association noted that the total legal sports betting in 2024 reached $147.9 billion, translating to an estimated $369.75 million in federal excise taxes across the 38 states and Washington D.C. that permit sports gambling.

Representative Dina Titus (D-NV), who previously introduced a similar bill to repeal the excise tax, stated that she once sought clarification from IRS officials regarding where the collected taxes are allocated within the federal budget, to which they reportedly had no answer. The US Treasury simply noted these funds go into the general fund.

Conclusion

With the reintroduction of the WAGER Act, there is a significant push to overhaul and modernise federal tax regulations surrounding sports betting. Supporters believe that these changes will attract more patrons to legal betting establishments while diminishing the hold of illegal operations. As the industry continues to evolve, only time will tell how legislative actions like this will sculpt the future of sports betting in the United States.