Legal sports gambling in North Carolina hit its first anniversary on March 11, 2025.  It’s fair to say that this activity has been popular with Old North State residents. In the first twelve months that North Carolinians were permitted to place bets on our phones and computers, we wagered $6.6 billion, or about $600 per person.

(I admit that I contributed to that total.  I was doing well until this happened.)

This dollar figure far exceeds expectations. When H347, the bill that eventually legalized sports gambling in North Carolina, was introduced in 2023, the General Assembly’s Fiscal Research Division estimated that total wagers would be only $4 billion in the first year. It took us just one year to hit the total that the General Assembly predicted for year three of legalized gambling.

Because the total amount wagered exceeded expectations, so too did state tax revenue.  North Carolina took in over $120 million in taxes on sports gambling from March 2024 through February 2025, well in excess of the $75 million originally projected. One foolish School of Government professor actually predicted that it would take several years for the state to hit $100 million in sports gambling tax revenue. (Update: I was wrong.)

Those revenues are generated by North Carolina’s 18% tax on gambling profits realized by sportsbooks (the companies that accept and payout bets, the largest being DraftKings and FanDuel).  Also known as the “hold,” this represents the difference between the amount wagered by customers and the amount paid out in winnings.  In other words, North Carolinians paid this tax with $714 million in losing bets. (Remember, kids: the house always wins!)

In addition to the 18% tax on sports gambling profits, the state also charges a sportsbook licensing fee of $1,000,000, good for five years.  With eight sportsbooks operating in North Carolina, the state earned $8,000,000 in fees, plus a few hundred thousand dollars more for licensing companies that support the sportsbooks. 

North Carolina’s gambling taxes are comparable to our neighboring states.  Tennessee charges 20% of revenue and $750,000 annually for sportsbooks licenses.  Virginia charges 15% of revenue and $250,000 for three-year sportsbook licenses.

This week the N.C. Senate proposed a two-year budget that would double the state’s gambling tax to 36%. That budget will be subject to negotiations with the N.C. House, but were it to pass then the state could expect much higher gambling tax revenues in future years.

Here is a comparison of sports gambling revenues and taxes over the past year for North Carolina and the two neighboring states that allow mobile sports gambling:

Sports Gambling Revenues and Taxes, March 2024 – February 2025 ($ millions)

Source: Legal Sports Report

Virginia’s tax revenue was substantially lower than North Carolina’s despite similar total amounts wagered as a result of the difference in tax rates (15% to 18%) and the difference in how sportsbooks were permitted to calculate their revenues (until recently, Virginia previously allowed sportsbooks to deduct the cost of promotional or bonus bets).

North Carolina’s population is greater than that of Tennessee or Virginia, meaning that per-person wagering in North Carolina ($603) was less than that in the other two states ($737 in Tennessee and $726 in Virginia).  But those states have more mature markets; Tennessee legalized sports gambling in 2020 while Virginia did so in 2021.  For North Carolina to top both of those states in total sports wagering in its first year of legalization is surprising.

While $120 million in gambling tax revenue is objectively a lot of money, it is a very small percentage of North Carolina’s $30 billion annual budget—not even one-half of one percent. WRAL provided this summary of how that $120 million in tax revenue will be allocated:

-$500,000 to the North Carolina State Lottery Commission to cover costs associated with running sports betting.

-$2 million to the North Carolina Department of Health and Human Services for gambling addiction education and treatment programs.

-$1 million to North Carolina Amateur Sports, which runs the State Games, to expand opportunities for youth to participate in sports.

-$300,000 for each of 13 UNC System athletic departments, not including UNC and NC State.

-$1 million to the North Carolina Youth Outdoor Engagement Commission.

After those distributions: 20% of the remaining revenue is distributed to those 13 UNC system athletic departments, 30% goes to the newly created North Carolina Major Events, Games, and Attractions Fund, and 50% goes to the state’s general fund.

The N.C. Senate’s budget proposal discussed above would change this distribution scheme to grant substantial payments to both UNC and N.C. State, two schools that do not receive any gambling tax revenues under current law. According to the revenue projections for the Senate’s budget proposal, UNC and N.C. State would each receive annual distributions of over $25 million.

Note that local governments do not get a cut of this revenue under current or proposed law.  Sports gambling is unlikely to have a major positive financial impact on local governments outside of the indirect benefits that might flow from increased spending on youth sports or major sporting events.  None of the eight sportsbooks currently offers “retail” betting at a brick-and-mortar facility; they are all virtual sportsbooks without physical presences in North Carolina.  When gambling was initially approved, several sportsbooks proposed construction of retail betting centers across the state.  But those plans have yet to come to fruition.  As a result, local governments will not benefit from increased property taxes or employment opportunities from the $6.6 billion in business that the sportsbooks generated last year.

The impact of gambling extends beyond tax revenues, of course.  It’s too early in the process to document the potential social consequence of legalized sports gambling on North Carolina communities. But evidence from other states show that there are quantifiable social costs associated with the ability to carry a casino in your pocket.  This study showed a 28% increase in bankruptcy filings within four years of a state legalizing sports gambling.  This article details one family’s harrowing experience with gambling addiction, a particular concern for young men.  Critics and former customers argue that sportsbooks prey on problem gamblers and rely on them for a substantial portion of their profits.  

The sports gambling landscape has changed dramatically in just a few years (read this post for a review of how we got here).  Stay tuned to see how it continues to evolve.