State-regulated commercial gaming generated $18.09bn in tax receipts in 2025, a 15.1% increase from the prior year, underscoring both the sector’s continued expansion and its growing fiscal importance to state budgets.According to data released by the American Gaming Association (AGA), funds derived from gaming activity were directed toward education, infrastructure and other public programmes across 38 commercial gaming jurisdictions, each of which reported annual revenue gains.

AGA President and CEO Bill Miller said the results reflect sustained consumer engagement with legal, regulated channels and demonstrate the resilience of state oversight frameworks. “The scale of revenue and associated tax payments underscores the need for continued state-level oversight as the sector develops,” Miller said, while also warning that emerging unregulated markets could erode those gains.

Land-Based Casinos Remain Revenue Anchor

Traditional land-based casino gaming continued to account for the largest share of industry revenue, generating $50.94bn in 2025, up 2.3% year over year. These operations contributed $11.33bn in taxes, a 7.2% increase. While growth in brick-and-mortar casinos was comparatively modest, the segment’s stability provided the bulk of state tax receipts, reinforcing its role as the foundation of the commercial gaming ecosystem.

Online segments again outpaced physical casinos in year-over-year expansion.

Sports wagering revenue rose 22.8% to $16.96bn, as total handle increased 11% to $166.94bn. State-regulated sportsbooks delivered $3.71bn in tax revenue, up 32.4% compared with 2024. Online casino gaming recorded even stronger percentage growth, climbing 27.6% to $10.74bn in revenue. Taxes from iGaming reached $2.59bn, marking a 36.9% annual increase.

The data suggests that while land-based casinos remain the largest revenue source, digital verticals are driving incremental growth and an increasing share of new tax contributions. Alongside its revenue report, the AGA raised concerns about prediction market platforms offering sports-related event contracts outside traditional state and tribal regulatory structures.

Industry data from platforms including Kalshi and Polymarket indicate that trading volume tied to Super Bowl LX exceeded $1.6bn. A significant portion of that activity involved proposition-style markets — such as contracts related to the halftime show — that are not widely available through conventional sportsbooks.

The AGA estimates that more than $500m in potential sports betting tax revenue has shifted to these alternative platforms. “Sports betting belongs under state and tribal regulation,” Miller said. “That’s how consumers are protected and how communities share in the benefits.”

The association argues that the growth of federally regulated prediction markets offering sports-linked contracts risks diverting consumer activity — and tax dollars — away from established state systems.

Tax Policy Tensions Emerge

Even as tax receipts climb, several states are reassessing their gaming tax structures, raising questions about the sustainability of growth.

In Illinois, a progressive tax rate of up to 40% and a per-wager fee of $0.25 to $0.50 introduced in July 2025 coincided with a 15% year-over-year decline in total bets placed during the autumn months. Although overall handle initially held steady as bettors shifted toward fewer, larger wagers, broader softness emerged by the end of the year.

House Bill 5143, introduced this month, seeks to repeal the per-bet fee amid concerns that higher transaction costs could push players toward offshore, unregulated operators.

Other mature markets have experienced similar pressures. Ohio doubled its sports betting tax rate from 10% to 20% in 2024. While betting handle continued to rise, sportsbook revenue declined as operators curtailed promotional spending to offset higher tax burdens. In Pennsylvania, where the sports betting tax rate stands at 36%, analysts linked a 10% drop in handle in early 2026 to lower promotional reinvestment compared with lower-tax jurisdictions.

Further increases remain under consideration. Ohio Governor Mike DeWine proposed raising the rate to 40% during the 2026–2027 budget cycle, though the plan did not gain legislative support. In Massachusetts, lawmakers are weighing Senate Bill 302, which would lift the online betting tax to 51% and impose restrictions on certain wager types and VIP programmes.

Meanwhile, New Jersey has approved a 19.75% rate for fiscal year 2026, and legislators in West Virginia introduced HB 4398 to raise the sportsbook tax to 25%. In New York, where the rate already stands at 51%, a 2026 proposal would allow for a potential reduction if additional operators are licensed.

Sports betting belongs under state and tribal regulation. That’s how consumers are protected and how communities share in the benefits.

Balancing Revenue and Market Health

The 2025 figures indicate that, for now, regulated gaming continues to deliver record-level fiscal returns for states. However, the interplay between higher tax rates, operator economics and consumer behaviour may shape the sector’s next phase. Analysts note that aggressive tax increases can reduce promotional incentives and alter betting patterns, potentially slowing long-term growth or redirecting activity to unregulated markets.

Absent finalized legislative changes, near-term revenue is unlikely to be immediately affected. Yet as states seek to maximize fiscal benefits from gaming expansion, policymakers face a delicate balance: preserving robust tax streams while maintaining competitive, regulated markets capable of retaining consumers.