Matthew Brown and Jeffrey Ohl of the University of Chicago studied how state taxes on sports betting affect prices and gambling behavior. They found that ad valorem taxes, which most states use, do not raise the prices bettors pay. Instead, sportsbooks absorb the tax burden by cutting marketing spending.
The researchers analyzed moneyline odds from major sportsbooks during the 2021-22 NBA season and tracked deposits from over 93 million debit and credit cards. When New York implemented a 51% tax on sportsbook revenue in 2022, companies like DraftKings and FanDuel did not increase odds enough to maintain previous profit margins. When Illinois raised its tax rate by 14 percentage points in 2024, local TV advertising in Chicago fell roughly 32% relative to comparable markets.
The study found a direct link between reduced advertising and lower betting. Every 1 percentage point of additional tax correlated with roughly 2% less sportsbook advertising. The researchers estimated that sports-betting advertising primarily recruits new bettors rather than encouraging existing ones to wager more.
Brown and Ohl concluded that ad valorem taxes are relatively efficient, raising government revenue while deterring some new gambling. However, they noted that if social harms from gambling are larger than assumed, a per-wager tax would be more effective. When Illinois introduced a per-wager tax in 2025, sportsbooks passed the cost to bettors, often through add-on fees. The findings appear in a working paper titled "Tax Design, Pass-Through, and Incidence in Sports Betting."