U.S. Senators Catherine Cortez Masto (D-Nev.) and Cindy Hyde-Smith (R-Miss.) have recently introduced the Withdrawing Arduous Gaming Excise Rates (WAGER) Act, a pivotal piece of bipartisan legislation designed to modernize the taxation of the sports betting industry. This act seeks to exempt legal sportsbooks from the longstanding “handle” and “head” taxes that have burdened the industry.

The impetus for change:

This legislative effort is grounded in the need to protect legal sportsbooks and gaming businesses, thereby allowing states like Nevada and Tribal communities to reinvest their gaming revenues more effectively into their local economies. In January 2023, Nevada alone generated a significant $50.44 million from regulated sports betting, showcasing the economic potential of this industry.

“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 Senator Cortez Masto in her press release. “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 Cindy Hyde-Smith also highlighted the benefits of the WAGER Act (pdf) for Mississippi, a state renowned for its vibrant tourism and casino sectors. “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 They could do more if not for this outdated federal excise tax on sports betting that only benefits illegal offshore operations which provide zero jobs or tax revenue,” Hyde-Smith noted. “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.”

Background of the betting taxes:

The federal sports betting excise tax was initially established in 1951 under the Internal Revenue Code. It was designed as a tool to suppress illegal gambling, imposing a 0.25% handle tax on all legal sports bets and a $50 annual head tax per employee at legal sports betting businesses. “The federal sports betting excise tax was enacted more than 70 years ago as a tool to prosecute illegal sports betting operators,” explained Bill Miller, President and CEO of the American Gaming Association (AGA).“Today, with sports betting legal in 38 states and Washington, D.C., this antiquated tax puts legal operators at a competitive disadvantage and rewards illegal offshore bookmakers that pay no federal or state taxes, offer no responsible gaming tools, and have no systems in place to prevent underage customers from using their platforms.”

Representatives Dina Titus (D-Nev.) and Guy Reschenthaler (R-Pa.) introduced similar bipartisan legislation in the U.S. House of Representatives, complementing the Senate’s efforts. The collective aim is to dismantle an outdated tax structure that penalizes legal gaming operators and inadvertently promotes illegal betting operations.

“Now that we have legislation to repeal the handle tax in both houses, I am hopeful that we can finally end this unfair tax which penalizes legal gaming operators and punishes sportsbooks for creating jobs,” said Representative Titus, according to the Las Vegas Review-Journal. This widespread legislative support underscores a significant shift towards more equitable taxation policies that could redefine the future of sports betting in the United States, promoting growth and fairness across the board.