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Maryland has officially announced that it has raised the tax rate for online sports betting operators in the state from 15% to 20%.

Signed into law last week, Governor Wes Moore approved House Bill 352 in a bid to start extracting larger tax revenues from the state’s growing gambling sector. Despite being only recently approved, the increase was part of a larger Budget Reconciliation and Financing Act, which was passed by Maryland lawmakers earlier this year.

However, the news came as some relief to betting operators after it was revealed that Moore had initially proposed a larger tax hike to 30%.

Governor Moore had initially argued that the higher rate was in keeping with several of Maryland’s neighbors, including Pennsylvania (36%) and Delaware (50%). Nevertheless, lawmakers eventually opted for the more moderate level of 20% after budget negotiations.

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Under the new law, following the signing of HB 352, 5% of Maryland’s mobile sports wagering proceeds will now be allocated directly into the state’s general fund. 

The remaining betting tax proceeds will support the state’s Blueprint for Maryland’s Future Fund – a dedicated 10-year initiative designed to increase educational funding.

Since launching legal sports betting in December 2021, Maryland has collected over $160 million in tax revenue for education alone.

Meanwhile, the existing tax rate on in-person betting remains unchanged at just 15%, excluding retail betting operators and venues from the new tax measures. However, experts suggest that the prevalence of online sports betting over in-person wagering methods in Maryland is the reason why lawmakers opted not to change the retail betting tax rate, for now.

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The changes in Maryland’s tax regulations mean online sports betting firms are now operating in the same tax bracket as in states such as Illinois and Ohio, both of which also impose a 20% tax on mobile betting.

However, states such as Ohio have proposed more extreme measures of doubling their tax rate to 40%. As more and more states begin to test the tax threshold in the evolving sports betting environment, it illustrates how lawmakers are targeting gambling operator profits to help rejuvenate public spending budgets.

“This wasn’t just about balancing a budget,” Moore said in a statement. “It was about weathering two storms: A fiscal crisis and a new White House that attacks our economy.”

For sportsbook operators, the imposition of the state’s increasing tax levies is already hitting their bottom lines. DraftKings – one of the eleven licensed online sportsbooks in Maryland – has already projected that the latest tax hike will reduce its 2025 revenue by $30 million while also cutting its adjusted EBITDA by $26 million.

In addition to Maryland, states such as North Carolina and Louisiana, like Ohio, are actively pursuing changes that could see tax increases hitting gambling operators. Colorado, too, has moved to close the legislative loophole posed by the tax status of free bets, aiming to claw back over $12 million a year for state projects.

For now, Maryland’s industry approach signals that it is taking a measured approach to raising tax revenues without the imminent risk of an exodus of online sportsbooks from the state. 

The inevitable trend of further states applying tax hikes will undoubtedly result in sportsbooks across the country continuing to take additional hits to their profits in the future.