The college bowl season has arrived, and the NFL playoffs are on the horizon, igniting the annual surge in sports betting powered by armchair optimism.

From the New Mexico Bowl to the College Football Playoffs and ultimately the Super Bowl, this festive stretch not only moves casual bettors into action but generates a significant and increasingly dependable windfall in sports gambling tax revenue for participating states.

For years, the promise of a consistent source of tax revenue has been a major selling point as state legislatures ponder whether to legalize sports betting, whether online or at a brick-and-mortar casino. That pitch has worked.

It remains a major reason why 40 states plus the District of Columbia and Puerto Rico allow legalized sports waging in some form, and 30 states and the District have access to online sports betting platforms.

On Dec. 1, Missouri became the latest state to adopt online sports betting, and more states are expected to follow in the coming years as the financial incentives become harder to ignore.

The proof is in the numbers. States collected more than $2.8 billion in tax revenue from sports betting so far in 2025, up from $1.8 billion in 2023, according to the Tax Foundation.

No state has benefited more than New York, which leads the way with $1.07 billion in tax revenues in 2024, up from $800 million the year before. Illinois was a distant but noteworthy second at nearly $241 million, followed by Pennsylvania at $197 million and Ohio at $189 million. New Jersey took in $162 million last year while Nevada generated a relatively meager $34 million.

Despite the impressive numbers, sports betting is not a significant source of tax revenue for any state. States continue to rely on individual income taxes, sales taxes and corporate income taxes as their primary sources of income.

According to the Journalist’s Resource, Montana at 1.35 percent is the only state that draws more than 1 percent of its total tax revenue from sports betting. The next closest states are New Hampshire at 0.94 percent and New York at 0.76 percent. New Jersey nets 0.26 percent from sports betting, Nevada 0.46 percent, and Ohio 0.38 percent, and Florida 0.02 percent.

By contrast, taxes on tobacco and alcohol, the so-called sin taxes, traditionally bring in more tax revenue than sports betting. Tobacco accounts for 5.29 percent of state tax revenue in New Hampshire, 1.45 percent in Florida, 0.91 percent in New Jersey and 0.70 percent in New York.

Part of the reason tax revenues vary from state to state is that each has the discretion to decide what rates are applied. Delaware began online sports gambling with a 50 percent tax rate, one of the highest in the country, behind New York and a few other states at 51 percent. In Iowa and Nevada, by contrast, the rate is less than 7 percent. 

With the U.S. sports betting industry generating a record $13.7 billion in revenue in 2024, some states are asking for a bigger cut of the pie. New Jersey increased the tax on online sports gambling to 21 percent from 14.25 percent, and Louisiana is hiking its rate to 21.5 percent from 15 percent. Maryland increased its tax to 20 percent from 15 percent.

How states choose to use the tax dollars also varies. Some states such as Arizona, Pennsylvania and Rhode Island funnel money from sports gambling taxes to a general fund that may go to help fund public schools, highways, law enforcement, amateur sports and other needs. In some states such as Vermont, the revenues go toward combating problem gambling.

As bowl season unfolds and the NFL postseason approaches, the flood of wagers will intensify. Sports betting has become as much a part of fandom as pregame shows and halftime highlights. As long as America keeps betting and the holidays deliver intriguing matchups, states will keep cashing in.