Missouri Sports Betting Ballot Measure Sparks Tax Rate Debate

Next week, Missourians will vote “yes” or “no” on Amendment 2, a ballot measure that could legalize sports betting in the state so residents can access our best sports betting sites. But while advocate Winning for Missouri Education argues that the measure could bring in millions for Missouri schools and teachers, others are not so sure.

If approved, Missouri sports betting sites are expected to offer a selection of our best sportsbook promos. However, as per Amendment 2, promotional bets would only be taxed if they exceed 25% of the “cash and cash equivalents” collected by the sportsbook. Therefore, many promotional costs will be exempt from state taxes, decreasing the tax revenue generated for governments and schools.

At the same time, Missouri’s proposed 10% tax rate on sports betting revenue is lower than the national average of 19%. Critics warn that the tax structure could lead to months when sportsbooks pay no taxes at all. Amendment 2 recognizes this potential, stating that negative balances can be rolled over from one month to the next.

Jack Cardetti, a spokesman for Winning for Missouri Education, said that the Missouri proposal “is very much in line with what has worked and been effective in other states.”

A nationwide debate

Policymakers from all over the U.S. continue to debate how to tax the rapidly growing industry. Since the U.S. Supreme Court overturned the Professional and Amateur Sports Protection Act (PASPA) in 2018, 38 states and Washington, D.C., have legalized sports betting in some form.

“It’s a fledging industry,” commented Brent Evans, an assistant finance professor at Georgia College & State University. "Nobody really knows what is a reasonable tax.”

Tax rates vary significantly across the country, from as low as 6.75% in the Iowa sports betting market up to 51% in the New York sports betting scene. In addition, Iowa allows promotional bets to be deducted from taxable revenue, while New York does not, making the gap even larger. Around half of the states with legal sports betting allow tax deductions for promotional costs.

About Amendment 2

The movement to legalize sports betting in Missouri gained momentum in January when the state's professional sports teams launched a petition to place the issue on the November ballot. By August, Winning for Missouri Education had gathered 340,000 signatures, doubling the required 170,000.

Gambling giants DraftKings and FanDuel have contributed around $43 million to Winning for Missouri Education, putting them in the spotlight to grab one of the state’s two online sports betting licenses if the measure is approved. 

Meanwhile, the opposing campaign, Missourians Against the Deceptive Online Gambling Amendment (MADOGA), has received around $14 million in funding from Caesars Entertainment, which also has its own sportsbook. While Caesars generally supports sports betting, the company disapproves of how Amendment 2 is written. MADOGA spokeswoman Brooke Foster echoes concerns that the financial benefits for the state could be less than promised. 

“We are building a broad coalition and are prepared to wage a vigorous campaign to educate voters across the state and ensure the measure is defeated,” said Foster.