Earlier this year, North Carolina became the 30th state to legalize online sports betting. During the last few months, you likely have seen commercials featuring famous athletes and celebrities encouraging you to gamble on your favorite teams. Sports betting, formally known as sports wagering, generated over $11 billion in revenue in 2023 in the United States, nearly a 46 percent increase from the previous year.

Sports wagering in North Carolina began at noon on March 11, 2024. From its inception through the end of May, sports betting companies licensed in the state, officially known as sports wagering operators, have earned approximately $234.8 million in gross wagering revenue.

Gross wagering revenue represents the total revenue earned by sports wagering operators minus the money that must be paid to winning bettors. State law imposes an 18% tax rate on the gross wagering revenue of each sports wagering operator. During the first 82 days of implementation (launch date through May), the revenue generated from the tax enforced on sports wagering operators surpassed $42 million (over $500,000 per day).

This figure easily outpaced the initial revenue projection included in last fall’s biennial state budget of just $8.5 million for the fiscal year (FY) 2023-24. Furthermore, the estimated tax revenue for the FY 2024-25, the first complete fiscal year of sports wagering, was only $36.1 million. Stated simply, tax revenues collected through sports wagering in FY 2023-24 alone are on pace to exceed the forecasts for fiscal years 2023-24 and 2024-25 combined.

Looking closer at how these funds will be utilized — mandated by N.C. Gen. Stat. §105-113.128 — $8.4 million of the tax revenue from sports wagering must be annually allocated toward the following areas:

  • $2 million to the Department of Health and Human Services (DHHS) for gambling addiction education and treatment programs
  • $1 million to North Carolina Amateur Sports to expand youth sports opportunities
  • $1 million to the North Carolina Outdoor Heritage Advisory Council for grants
  • $300,000 to each of the 13 athletic departments of institutions in the UNC system
    • Excluding UNC-Chapel Hill and North Carolina State University
  • $500,000 in administrative costs to oversee the sports wagering system

Any tax revenue collected exceeding $8.4 million will be apportioned to the following domains:

  • 20 percent divided equally among the 13 athletic departments mentioned above
  • 30 percent to the North Carolina Major Events, Games, and Attractions Fund
  • 50 percent to the state’s General Fund

Assuming a continuation of the current trend in sports wagering, fiscal year 2024-2025 is poised to generate approximately $188 million in tax revenue. Based on the current state law outlined above, this would provide nearly $90 million to the state’s General Fund. It is worth noting that the likelihood that tax revenues exceed these figures is feasible. The National Football League and NCAA Division I Football, both of which have fall seasons, account for the largest markets in the domestic sports wagering industry within their respective levels of competition.  

It is paramount that policymakers are prudent stewards of the money allocated to the General Fund from the sports wagering tax. It is never wise to utilize taxpayer money to bet on risky ventures that lack proven track records. Whether it be gambling on sports or investing in experimental technologies, speculation should be left to private individuals and companies, not the government.