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Pennsylvania Weighs Crackdown on Sportsbook Promos Amid Revenue Concerns

Sports Writer

Publish Date: Jul 30, 2025

Fact checked by: Sara Jane Gamelli

Key Points

Current deductions shift effective tax rate from 36% to 23% after deductions
Handful of PA lawmakers want to cap deductions for promotional spending by sports betting operators
Pennsylvania seeks tax revenue to fund important social programs

The amount that sports betting operators can deduct for promotional spending may soon shrink in Pennsylvania if some lawmakers get their way.

The state is seeking to add more tax revenue in light of recent shortages in discretionary funds

A lucrative tax deduction that allows sports betting giants to write off millions in promotional spending is facing new scrutiny from Pennsylvania lawmakers, who are considering changes that could significantly boost state tax collections and dial down the relentless barrage of gambling advertisements seen across the state.

aerial drone photograph showcasing the pennsylvania state capitol in harrisburg

At the heart of the issue is a state policy that permits sports betting operators to deduct the value of “promotional credits” or the "free" bets, deposit matches, and other bonuses used to attract new customers—from their gross revenue before paying taxes.

While Pennsylvania boasts one of an official 36% tax rate on sportsbook revenue, this policy means operators are paying far less

According to industry analyses, the unlimited deductions have lowered the average effective tax rate for operators to around 23%.

That difference between the official rate and the actual rate paid represents a significant revenue shortfall that has captured the attention of policymakers in Harrisburg.

Sources in the state capital indicate a serious legislative interest in amending or eliminating the promotional deduction policy to achieve two primary goals: generating more tax revenue and addressing growing public and media concern over the sheer volume of gambling advertisements.

The Promotional Blitz of Gambling

Since Pennsylvania legalized sports wagering, the state has been inundated with marketing from industry leaders like FanDuel and DraftKings.

These companies engage in a fierce battle for market share, using promotional spending as their primary weapon

Offers of “risk-free” bets up to $1,000 or promises to match a user’s initial deposit are designed to rapidly acquire new customers in the competitive digital landscape.

While effective for the sportsbooks, this marketing blitz has made gambling ads a ubiquitous feature of live sports broadcasts, billboards, and online media, raising questions about their social impact.

By limiting the tax deductibility of these promotions, lawmakers could disincentivize the high-spending ad campaigns while simultaneously increasing the state’s tax haul.

Sports Betting is not a Boon to State Revenue

The debate comes as legal sports betting has become a reliable and growing source of tax revenue for the commonwealth.

Like dozens of other states that have legalized wagering since a 2018 Supreme Court decision, Pennsylvania taxes the gross gaming revenue (GGR) of licensed operators, essentially the total amount of wagers kept by the house after winning bets are paid out.

This revenue stream has funneled hundreds of millions of dollars into state coffers, but the current promotional credit rule allows a substantial portion of potential GGR to be shielded from taxation.

Restricting those deductions would force operators to pay taxes on a much larger revenue figure, directly increasing the flow of money to the state.

The policy is seen as particularly vulnerable to change because it is codified in regulations set by the Pennsylvania Gaming Control Board, rather than in state law. According to the latest news, this provides motivated policymakers with multiple avenues for action.

They could pressure the board to amend its own rules or pass new legislation that would override the current regulatory framework.

As lawmakers weigh their options, the industry is facing a potential shift that could reshape its financial obligations to the state and change how it communicates with its customers.

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