U.S. sports betting in 2025 faces expansion hurdles and tax hikes

February 17, 2025

U.S. sports betting in 2025 faces expansion hurdles and tax hikes

The U.S. sports betting industry is not just developing fast. It is on the verge of a potential growth spurt. Several states are pushing for legalisation while others are preparing for higher taxes. Regulators are also cracking down on offshore operators. The market is shifting, but will it grow or stall?

This is a series of three articles based on the Vixio Regulatory Intelligence U.S. Sports Betting & iGaming Outlook January 2025. Across this series, we will explore the key forces shaping the market, the states pushing for expansion, and the challenges operators face in navigating regulation, tax pressures, and shifting player behaviour.

Part One looks at the shifting landscape of U.S. sports betting, from states leading the charge to rising tax pressures and efforts to rein in offshore operators.

Part Two turns to iGaming, where progress has slowed. We explore the states pushing for legalisation and the union concerns that continue to hold things back.

Part Three will tackle the bigger picture and look at market consolidation, payment challenges, and the rise of sweepstakes platforms as regulators race to keep up.

Together, these articles offer a comprehensive look at where the industry is heading—and who might come out on top. With the industry already exceeding billions in revenue, 2025 could be a defining year for the sector’s future.

***Data from Vixio Regulatory Intelligence***.

More states could join the legal market

Minnesota looks closest to legalising sports betting. Stakeholders have a framework for a deal. Tribes want control of mobile betting. Racetracks want a share of tax revenue. If lawmakers agree, Minnesota could be the next big market. Strong bipartisan interest and the potential for increased tax revenue could set the tone for other holdout states. A key challenge remains uniting all stakeholders, particularly tribal operators, who insist on exclusive control.

Texas remains a challenge. Lt. Gov Dan Patrick stands firm against legalisation. Republican support is weak in the Senate. Lobbyists are working hard, but progress seems unlikely. Despite strong public demand and the potential for billions in state revenue, political roadblocks continue to stand in the way. Supporters argue that tax revenues from legalised sports betting could benefit education and infrastructure, but Texas remains one of the most resistant markets in the U.S.

Georgia has failed multiple times to pass sports betting laws. The latest attempt stalled in 2024. Some lawmakers want a constitutional amendment. Others believe standard legislation is enough. Either way, the odds remain low for 2025. Georgia’s continued resistance raises questions about whether it will ever embrace regulated sports betting, even as neighbouring states move forward. Betting supporters may push for a new bill, but opposition remains intense from conservative lawmakers who fear gambling expansion.

Southern states wrestle with sports betting hurdles

Mississippi could be another contender. The state has land-based sports betting but lacks mobile options. A 2024 bill failed due to fears of cannibalisation. Smaller casinos worry that online betting will hurt their revenues. The issue remains unresolved. Mobile betting could be a game-changer for Mississippi, increasing revenue and making the market more competitive with states that fully embrace online betting. If lawmakers can craft a compromise that benefits all parties, 2025 could see fresh discussions.

Alabama is considering a wider gaming expansion package that could include casinos, a state lottery, and sports betting. While progress remains slow, 2025 could see a new legislative movement as supporters push for comprehensive reforms.

The New York sports betting market achieved dual records in headline revenue and year-on-year growth in November 2024. GGR rocketed by 53.5 percent to a record high $232.2 million despite handle growth slowing to its lowest rate since March. New York earned the title of the nation’s leading sports betting market, with its trailing twelve-month revenue exceeding $2 billion. It was the first state to achieve that. While operators may celebrate, the question is, with taxes high and growth slowing, how long can this dominance last?

Tax hikes are on the horizon

More states are looking at tax increases. Operators in Ohio (20 percent tax rate) and Illinois (15 to 17 percent) are already paying more.

Lawmakers see sports betting as a simple way to raise revenue. With rising government deficits and increasing funding needs, states may raise operator taxes, impacting the industry’s profitability. Some states see gambling taxes as a quick fix for budget shortfalls, but the long-term implications could include operators passing costs onto consumers.

Industry leaders complain about rising costs, but they keep paying. States know operators will not leave. Those with lower tax rates are most at risk. Legislators may push for higher rates to close budget gaps. Excessive taxation may cause some operators to rethink their investments in high-tax states because of diminishing returns.

Illinois has already seen pushback from major sportsbooks, warning that an increase could stifle growth. Some operators are trying to compromise by pushing for online casino gaming. They argue that tax hikes should come with new opportunities. Whether lawmakers agree remains to be seen. The push for online casinos could boost revenue but may also face stronger resistance from land-based casinos and anti-gambling groups. This may lead to extended discussions as different parties attempt to secure their market share.

Regulators are taking a tougher stance

Offshore operators are under pressure. Bovada received warnings from state regulators in 2024. The company complied in several states. Will more regulators follow? That remains the big question.

Regulators are set to intensify actions against unlicensed betting sites, which may drive more bettors to legal options. Offshore markets have been a primary concern for authorities who want to close loopholes and ensure local operators gain control. Fantasy sports are also facing a review. Some pick ’em style platforms have adjusted their products.

Businesses may need to adapt their models as the debate over fantasy sports definitions continues into 2025. With billions wagered on daily fantasy sports, states are eager to clarify regulations and confirm compliance. PrizePicks and Underdog Fantasy have already changed their business models to avoid regulatory challenges, but new restrictions could reshape the industry.

Limits on winning players have sparked controversy. Regulators are hearing complaints from high-stakes bettors. Some sportsbooks say the issue affects only a few customers. According to some, limiting player numbers may harm profits. Transparency in sportsbook policies may become a growing focus in 2025. Some states could introduce new rules requiring sportsbooks to clearly define their policies on limiting players as concerns about fairness in the betting market grow.

California’s tribes are also monitoring the growth of sweepstakes-style sportsbooks like Fliff with increasing concern. Although large-scale sports betting legislation remains stalled, tribal leaders are wary of how these alternative platforms could undermine their long-term gaming interests. Platforms like Fliff operate in grey legal areas. Tribes fear these new models could set a precedent for alternative online casino-style games outside their control.

The integrity of sports remains a concern

Match-fixing and high-profile sports betting controversies involving college athletics and professional leagues heightened integrity concerns throughout 2024. Leagues want more safeguards. Some states may restrict certain bet types. Integrity measures will be a hot topic in 2025. Sportsbooks, leagues, and regulatory bodies must work together to ensure fair play and stop game manipulation.

Some lawmakers propose forming independent watchdogs to oversee betting markets. Regulators are also stepping up enforcement. New Jersey is leading with its approach of setting hefty fines for violations. Other states could adopt similar approaches. The industry must prepare for stricter oversight. The effectiveness of self-regulation will likely be tested as more states crack down on improper practices. With an increasing focus on responsible gambling, some jurisdictions could introduce new consumer protection laws.

What comes next

The U.S. sports betting market is expanding, but the road is getting tougher. More states want to enter, but legal hurdles remain. Taxes are rising, and operators must adjust. Offshore betting is under fire, and regulations are tightening. With every legislative session, new challenges and opportunities materialise.

Operators must stay ahead of the curve. Those who adapt to changing regulations, build robust, responsible gaming measures, and build public trust will thrive. Others may struggle in an increasingly competitive and scrutinised environment. Innovation in betting technology and customer engagement strategies will be fundamental to defining winners and losers.

The question is not whether sports betting will survive. The question is how the industry will adapt. 2025 could be the year that defines its next phase. With billions at stake, the battle for control, regulation, and expansion is just beginning. Stakeholders who plan ahead and welcome change will be in the best position to capitalise on emerging trends.

*SiGMA News recently published an insightful two-part interview with James Kilsby, Chief Analyst and VP of Americas at Vixio Regulatory Intelligence. James shares his insights into the regulatory landscape and discusses the obstacles operators must navigate when expanding into Latin America and other global markets.