The Rise of Online Sports Betting in North Carolina: A New Revenue Stream

Online sports betting has rapidly gained traction in North Carolina, marking a significant shift in the state’s gambling landscape. Since its legalization in March 2024, online sports betting has not only become a popular pastime for many residents but also a substantial source of tax revenue for the state. Now officially legal and regulated, North Carolina imposes an 18% tax rate on sports betting revenues, positioning it as the 11th highest in a comparison of 27 states with similar allowances.

Taxation Comparison Among States

According to a recent report from the Tax Foundation, North Carolina’s 18% tax rate places it in the middle tier compared to other states. At the high end of the spectrum, New York, New Hampshire, and Rhode Island hold a staggering tax rate of 51%, the highest in the nation. Conversely, Iowa and Nevada maintain the lowest rates at 6.75%. It’s crucial to note that this report excludes Florida, Oregon, and Delaware, even though online sports betting is legal in these states. This is primarily due to regulatory differences that make them less comparable to North Carolina and others where college sports betting aligns more closely with public interest.

Constitutional Allowances

One unique aspect of North Carolina’s taxation framework is rooted in the state constitution, which caps income tax rates at 7%. However, sports wagering revenue is categorized differently than income. Joseph Harris, a fiscal policy analyst for the John Locke Foundation, explains that the state is therefore positioned to impose an 18% tax on sports betting earnings without violating this constitutional cap. This unique arrangement allows North Carolina to capitalize on a burgeoning market effectively.

Revenue Generation and Allocation

Recent data from the North Carolina State Lottery Commission reveals that the state has seen impressive numbers since sports betting’s inception. For September 2024 alone, the "Gross Wagering Revenue" reached over $70 million, leading to approximately $12.6 million in tax revenue, marking a high point for the current fiscal year to date. This surge underscores the potential of sports wagering not just as entertainment, but as an important economic driver.

The report forecasts a promising trend for the fiscal year 2024-2025, estimating the possibility of generating around $188 million in tax revenue from sports betting, with nearly $90 million expected to flow into the state’s General Fund.

Use of Tax Revenue

Understanding where this revenue goes is vital for transparency and public trust. The North Carolina state law prescribes specific allocations for the first tranche of tax revenue, amounting to approximately $8.4 million. Here’s how the remaining funds are distributed:

• 50% to the General Fund: This money supports various state services and infrastructure.
• 20% to State Universities: This portion is shared equally among 13 state universities (excluding North Carolina State and the University of North Carolina), aimed at bolstering their athletic programs.
• 30% to the North Carolina Major Events, Games, and Attractions Fund: This fund is designed to stimulate job creation and significant investments in the state, focusing on attracting sports events and tourism.

In its first fiscal quarter, gross wagering revenues totaled approximately $146 million, generating $26.3 million in tax revenue. This ongoing influx of capital showcases the potential for sports betting to play a crucial role in the state economy.

Future Outlook

As the state moves further into the NCAA and NFL seasons, the Carolina Journal and other institutions will continue to monitor performance metrics in sports betting closely. These upcoming months are expected to bring in even higher revenues due to increased public interest during major sporting events.

In conclusion, the legalization of online sports betting in North Carolina is transforming not just how residents engage with their favorite sports but also how state funding is structured. With a competitive tax rate, a strategic allocation for vital public services, and strong revenue projections, sports betting is positioned as an influential and beneficial part of North Carolina’s economic landscape. As interest continues to grow, it’s clear that we are just at the beginning of what could be a promising financial avenue for the state.