Louisiana Sports Betting Tax Hike Aims to Fund College Sports
The Louisiana legislature ignored the warnings of both experts and industry advocates to hike the state’s tax on sports betting by almost 50%.
Louisiana has hiked the tax rate on sport betting to 21.5%. © Tomas Martinez, Unsplash
Key Facts:
- Louisiana HB 639 will take the tax rate from 15% to 21.5%
- A previous version would have raised the rate to 32.5%
- It passed the Senate on a 35 to 3 vote with bipartisan approval
- It now awaits a likely signature from Governor Landry
Louisiana joined a handful of other states like Illinois, Maryland, and Colorada in a bold experiment to see just how much pressure it takes before you strangle that goose laying golden eggs.
Governor Landry and the legislature wiped almost $1.2 billion in state revenue last year by cutting both personal and corporate tax rates, leaving the state with an estimated $500 to $ 700 million budget deficit that needed to be filled.
They accomplished some of that by raising the state sales tax and diverting about $280 million meant for Louisiana roads and bridges into the general fund, but clearly, more was needed. An interesting allocation twist obtained bipartisan support.
The current allocation divides the money, with 25% going to early childhood education, 10% to local city governments, and a somewhat paltry 3% to responsible gaming and gambling addiction programs. The rest is chunked into the State’s general fund.
However, under the new law, the state would carve out an additional 25% for something it’s calling the SPORT fund. Supporting Programs, Opportunities, Resources, and Teams. (SPORT) This money would then be spent on the 11 Division 1 NCAA schools spread across the state.
While lawmakers were careful to write the bill so that the money could be used for things like insurance and medical coverage for student-athletes, increased scholarships, or even settling lawsuits, we suspect it is the facility enhancements box that will be checked most often.
With an estimated increase of around $80 million in total tax revenue, these schools would see about $1.7 million each. A powerhouse SEC team with a rabid state following can produce astonishing revenue. In LSU’s case, the entire athletic department generated approximately $220 million last year, with about half of that amount coming from Football alone.
However, these programs are also eye-wateringly expensive; LSU spent almost $218 million in total on its programs. Bryan Kelly, LSU Football Head Coach, is paid slightly over 9 million a year. So, for a program like LSU, $1.7 million may not sound like much, but it would actually double their current surplus.
For small Division One schools like Louisiana NSU, which only spent $11 million dollars on athletic programs last year, this kind of money allocated yearly could have a huge impact on the school’s ability to recruit higher caliber players and coaches as well as modernize aging facilities.
But at What Cost
While all of this was enough to win over both Senators and the Louisiana House, which also passed the bill overwhelmingly, 74-15, it begs the question of whether the state should be counting those eggs just yet.
Louisiana’s licensed and taxed sports books do, in fact, have many other competitors, most of whom do not act on an even playing field. These offshore operators don’t pay taxes or have restrictions on the types of bets you can place. Most notably, there was an inability to place prop bets on college athletes.
Now, operators like DraftKings and FanDuel are facing off with prediction market makers like Kalshi and PolyMarket. These companies also don’t pay state sports betting taxes and face almost zero regulation since they claim to be regulated by the Federal CFTC, which has just shrugged its shoulders at the explosion of what many claim is unlicensed sports betting.
In recent weeks, you couldn’t log in to your stock trading account at Robinhood without being bombarded on the front page with Kalshi bets, and now X (Twitter) has become the official partner with Polymarket, meaning tens of millions of bettors are tempted daily by these new prediction markets.
You won’t need an Economics degree from Tulane to see that a highly taxed and over-regulated State market with already fierce competition for every betting dollar will quickly find itself displaced by operators who aren’t paying 21.5% of every bet to the State and can apparently offer almost any wager type with impunity. Presidential elections and the death of Popes have all been fair game so far.
Louisiana may get its SPORT funding and maybe even a few ribbon cuttings at new stadiums over the next few years, but if it drives bettors to underground sites or the new unlicensed prediction markets, or worse, drives current operators completely out of the State, the scoreboard will read Grey Market Operators 58 Louisiana 3, much like that infamous Florida game.
