Three groups offer Americans a way to bet on sports right now. Licensed US sportsbooks pay anywhere from 10% to 51% in state tax on their revenue. Federally regulated prediction markets pay nothing to state sportsbook regulators because they sit under a different framework entirely. Offshore crypto sportsbooks pay nothing to anyone in the US. Same product, give or take the legal definition. Three completely different cost structures. And the gap is widening.
US States Keep Squeezing
North Carolina lawmakers are now floating a tax hike from 18% to somewhere between 20% and 30% on sports betting revenue. A Senate proposal last year tried to push it all the way to 36% but failed. The state has collected over $287 million in sports betting tax since launching in March 2024, and a 30% rate from day one would have added another $200 million on top.
North Carolina is not alone. New Jersey jumped its online sports betting tax to 19.75% from 13%. Maryland raised to 20%. Louisiana raised to 21.5%. Illinois added a per-bet tax structure on top of revenue tax. Massachusetts has an active bill proposing 51%, which would match New York for the highest rate in the country. Ohio’s governor pushed for 40% before lawmakers blocked it. Governors in Michigan, Arizona, and Illinois have all proposed gambling tax hikes in their 2026 budgets.
The Sports Betting Alliance, the industry lobby covering DraftKings, FanDuel, BetMGM, bet365, and Fanatics, is running text-message campaigns warning that higher taxes get passed to bettors through worse odds and smaller promos. They are not wrong. They are also not winning many of these fights.
Prediction Markets Step In
Kalshi, the federally CFTC-regulated prediction market, is on a tear. April 2026 trading volume hit nearly $15 billion. By Kalshi‘s own accounting, about 70% of that is sports-event contracts. Industry sources put the share closer to 90%. The Super Bowl alone drove over $500 million in trades.
DraftKings and FanDuel have already entered the prediction markets space. In recent earnings calls, both framed sports-event contracts as a customer-acquisition channel in states where they cannot operate licensed sportsbooks. That language matters. The major sportsbook operators are not just watching the trend, they are building parallel infrastructure inside it.
Why? Federally regulated prediction markets operate outside state sportsbook tax frameworks. A Kalshi sports-event contract is structurally a derivative, not a wager. That distinction may or may not survive future regulatory rulings, but right now it means a $100 prediction on Kalshi avoids state-level sports betting taxes that would apply to the same $100 bet at a licensed sportsbook down the road.
Offshore Crypto Sportsbooks Quietly Benefit
The third path gets less coverage in mainstream gambling press. Offshore crypto sportsbooks licensed in Anjouan, Curaçao, or Costa Rica continue to take action from US bettors who use VPNs or simply do not bother. They pay no US taxes, accept crypto deposits with limited KYC, and offer odds and promotional structures regulated US books increasingly cannot match.
When promotions get cut and odds widen at licensed US sportsbooks, the most price-sensitive bettors do not stop betting. They look for the operator with the better number. For a growing share of that audience, the better number is on a crypto casino sportsbook with no state tax built into the line.
What It Means for Bettors
Licensed US sportsbooks remain the easiest, safest option for casual bettors who value predictability, regulated dispute resolution, and easy banking. The trade-off is increasingly expensive odds and shrinking promo budgets as state taxes compress operator margins.
Federally regulated prediction markets like Kalshi offer a different product mechanically, more like a binary derivatives trade than a parlay. The structural tax advantage shows up in pricing, and the big sportsbook operators have noticed.
Offshore crypto sportsbooks offer the sharpest pricing of the three and the lightest verification requirements. They also offer the least recourse if something goes wrong, since US state regulators cannot enforce against an Anjouan-licensed operator on behalf of a player in Raleigh.
Three options, three trade-offs. The interesting part is that the policy choices of US state governments are quietly making options two and three more competitive against option one. Whether that was the intended outcome is another question.
