Pennsylvania Lawmakers Considering Tax Hike on Sportsbooks

Rumors are swirling around a potential sports betting tax hike in the Keystone State.

Pennsylvania lawmakers are reportedly discussing raising the tax rate on Pennsylvania online sports betting. The state’s current rate of 36% is already the second-highest in the country, but some believe the size of the market justifies raising it. While no bill to make the change has been introduced, talks focus on enacting it during the 2026 legislative session.

Democrats, who hold a one-seat advantage in the state, are reported to support the bill. This should lead to plenty of support, but it may not be enough.

The sports betting industry is already circulating warnings about the fallout from a potential tax hike. We saw them deliver on those warnings in Illinois, where all ten Illinois online sportsbooks added new per-wager fees and higher bet minimums.

The state has also been at the center of new gambling regulations, including efforts to tighten payment methods — as seen in the Illinois bill that would ban credit cards for the gambling industry.

Opponents to the proposed tax hike fear bettors will end up paying the price. We have seen that happen in Illinois, where two recent tax hikes have been passed onto customers. This makes betting on sports more expensive and could lead more bettors to skip placing wagers or to seek out illegal alternatives.

While discussions over the proposed hike continue, no other action has been taken to make the change.

Tax Hikes Could Undo Sports Betting

Battles between states and sportsbooks over tax rates aren’t new, but this one is different.

Over the last year, sports prediction markets (or sports contracts) have become a significant rival to the country’s sports betting revenue. The federal government’s refusal to classify the emerging industry as gambling has allowed it to avoid the taxes and regulations that sportsbooks face, giving it an edge.

With operators offering sports contracts that don't pay state taxes, markets have a lot to lose if their sportsbooks can’t compete. Raising tax rates will make that even more difficult, with many bettors likely to choose a cheaper sports prediction market rather than a sportsbook.

 If lawmakers decide to ignore the warning from sportsbooks and approve a tax hike, the state could end up being a cautionary tale for the other 49.