North Carolina’s Proposed 23% Sports Betting Tax and Gambling Loss Deductions Mark Another Shift in State Policy
North Carolina lawmakers are weighing changes to the state’s sports betting framework as part of the latest budget proposal. According to a WRAL News report, the plan would raise the tax rate on gross gaming revenue from the current 18% to 23%. It would also allow gamblers to deduct losses against winnings on state income taxes and direct a share of revenues to UNC and NC State.
This marks the second consecutive budget session where an increase has been considered. The proposal comes as the state has already generated substantial tax revenue from its eight licensed online sports betting operators.
Brian Murphy of WRAL News detailed the key elements. The changes could take effect in the coming fiscal years if approved.
Tax Rate Increase and Revenue Implications
The newest budget proposal would lift North Carolina’s sports betting tax from 18% to 23%. In the prior year’s negotiations, the Senate had pushed for a jump all the way to 36%, though the House did not support it and the finalized budget left the rate unchanged.
Fiscal year 2026 data from the North Carolina State Lottery Commission shows operators have contributed more than $133 million so far. At the proposed 23% rate, that figure would have exceeded $170 million for the same period.
This adjustment would generate additional state funds. Yet it also raises immediate questions about operator margins in a maturing market.
The eight licensed operators currently pay the 18% rate. Any increase directly affects their after-tax returns on handle converted to gross gaming revenue.
Revenue Allocation to UNC and NC State
Under the proposal, UNC and NC State would begin receiving portions of sports betting tax revenues starting July 1, 2027. The state’s 13 other UNC schools already benefit from these dollars.
This expansion aligns funding with the two largest institutions in the system. It reflects a strategic choice to channel gambling-derived revenue into higher education.
From my perspective after decades observing state-level gaming policy, such allocations can stabilize public support. They tie industry growth to visible public goods.
Still, the mechanics matter. Operators will weigh the effective tax burden against customer acquisition costs and retention in North Carolina.
Gambling Loss Deductions and Tax Reporting Changes
The budget proposal would permit North Carolina gamblers to deduct losses against winnings when filing state income taxes. Currently, bettors pay taxes on winnings regardless of net results.
A hypothetical in the WRAL report illustrates the point: a gambler with $15,000 in winnings and $16,000 in losses would still owe taxes on the full $15,000 under existing rules. The new provision would change that equation.
This state-level relief could offset a recent legislative requirement. Licensed operators must now report users winning more than $2,000 in a year to the Department of Revenue.
The change echoes federal adjustments under President Donald J. Trump‘s (R) One Big Beautiful Bill Act, signed in July 2025. That law limited professional gamblers to deducting 90% of losses, down from 100%.
Risks and Counterarguments in the Proposal
A higher tax rate carries risks for market stability. Neighboring states with lower effective burdens could draw operator focus or prompt bettors to seek alternatives.
The 5-point hike from 18% to 23% is more measured than the prior 36% push. Even so, it compresses margins at a time when customer acquisition remains expensive and product differentiation is narrowing.
Critics might argue the loss deduction softens the blow for players while the state still collects more overall. Operators, however, face the direct hit on gross gaming revenue without a corresponding reduction in regulatory or compliance costs.
This tension between revenue goals and industry health is familiar. States have repeatedly tested higher rates only to reconsider when gray-market activity or slowed growth appears.
The proposal also highlights convergence between sports betting, education funding, and tax policy. How these pieces fit will shape North Carolina’s competitive position.
The Bottom Line
North Carolina’s latest budget proposal signals continued evolution in its approach to sports betting. The move from 18% to 23%, paired with loss deductions and expanded university funding, balances multiple priorities. Operators and client-partners should model the net impact on margins while monitoring legislative developments.
What happens next could influence other states weighing similar adjustments. The outcome will test whether measured tax increases support long-term market stability or simply shift activity elsewhere. I will be watching closely as the budget process unfolds.
