Legal sports betting has become a significant business in the United States, with 33 states and Washington DC legalizing it and three more states planning to start in 2023. The American Gaming Association (AGA) predicts that commercial gaming revenue will exceed $60 billion in 2022, a year-over-year increase of 13.9%.
While each state has the freedom to allocate revenues from sports betting as it sees fit, the majority of states put the money towards their General Fund. However, some states are getting creative with the initiatives they fund using gambling earnings. For example, Colorado allocates a portion of the tax revenue to the Colorado Water Plan, aiming to increase the state’s water resilience by 2050. Illinois directs some of its tax revenue towards a capital project fund that improves roads, bridges, public transport, schools, and universities. Montana directs its excess revenue to a scholarship program for in-state high school graduates majoring in science, technology, engineering, mathematics, or medicine.
Tennessee’s law dictates that 80% of its privileged tax revenue collected goes to lottery accounts for education, 15% goes to the General Fund for municipal infrastructure projects, and 5% goes to Tennessee Mental Health for responsible gambling activities and will be donated to the Bureau of Substance Abuse. West Virginia directs funds from sports betting to the Civil Service Insurance Administration’s Stabilization Fund (PEIA), which is struggling with increasing health care costs and higher prescription drug costs that have resulted in a $92 million deficit in 2022.
Overall, states have different approaches to using tax revenues from legal sports betting, with some prioritizing education and infrastructure, while others focus on environmental and mental health initiatives.