Exploring the Sports Betting Tax Dynamics for Governments in North Carolina

If you’ve turned on the TV, streamed music, or logged onto social media in North Carolina recently, you’ve likely seen ads for online sports betting companies inundating your feed. This is because legal online sports betting went live in North Carolina for the first time this month, on March 11, 2024.

The ability to legally place wagers online in North Carolina was preceded by Governor Cooper signing House Bill 347 (HB 347) in June 2023, which legalized betting on professional, college, and amateur sports, as well as horse racing. Proponents say the passage of the bill will boost the state’s budget and foster economic opportunity.

The State of North Carolina can receive revenue from sports betting by taxing the “hold,” which is the amount sportsbooks retain after all bets have been settled. Different states tax different amounts, but North Carolina’s rate is 18 percent, which can result in extra money for the state, depending on the volume of gambling. “100 million dollars in tax revenue for North Carolina seems reasonable after a year or two,” said Christopher B. McLaughlin, Albert and Gladys Hall Coates Distinguished Term Professor of Public Law and Government.

Additionally, sportsbooks must pay the state a licensing fee to operate. Currently, the rate is one million dollars for five years. HB 347 allows up to 12 interactive sports wagering licenses to be granted in the state. “100 million dollars in our state’s budget is less than one percent of the whole. However, it’s still better to have that additional revenue than not,” said McLaughlin. Some of the State’s additional funds are expected to go towards North Carolina Amateur Sports, 13 public universities, the state’s General Fund, and gambling addiction education programs and treatment, among other initiatives.  

HB 347 allows for betting both online and in person at retail sportsbooks. Before the bill passed, sports betting was only legally allowed in person at three casinos located on tribal lands.

Building physical sportsbook locations provides local governments an opportunity to see some of the financial benefits of legalizing sports betting. “Local governments don’t have the opportunity to tax the activity of sports gambling, except through property taxes,” said McLaughlin. “Local governments could levy property taxes on the sportsbook and any associated development around it. They may see increased economic activity and tourism from building these locations.”

HB 347 places limitations on where sportsbook locations can be built. For instance, they must be near venues that are the home of professional sports teams that play at a national or major-league level, such as PNC Arena in Raleigh. They can also be near facilities that host golf tournaments with over 50,000 spectators, or at motorsports facilities that host more than one NASCAR national touring race annually. These restrictions affect the number of localities in that would benefit from building retail sportsbooks.

As North Carolina charts its course into legalized sports betting, the landscape of entertainment and revenue generation continues to shift. To learn more about HB 347 and its implications for state and local governments, read McLaughlin’s blog.