Online sports betting could be lucrative for Alaska if new legislation gets the taxes right

Online sports betting is no longer a pastime limited to die-hard fans. It is the core of a rapidly growing industry, even though it is still banned in 20 states, including Alaska. But that may change this year.

Alaskan lawmakers are actively debating this session whether they should open their digital borders to this market. If legalization is a step Alaska decides to take, the right tax mix could result in notable fiscal advantages for the state.

Since the Supreme Court cleared the way for states to establish legal betting markets in 2018, 30 states and the District of Columbia have created statewide sports betting markets, albeit with varying designs.

That decision has paved the way for sports betting markets to grow rapidly in states that have allowed them. It’s a big and growing market, as well as a lucrative one. In fiscal year 2025, more than $157 billion in wagers were placed, leading to more than $3.2 billion in state tax revenue. As Alaska considers legalization, understanding how states structure their markets is key to ensuring it not only raises revenue, but also keeps consumers out of unregulated black markets.

There are two lessons to consider. The first is simple: states that embraced open markets that were easy to access saw robust participation. The second is likewise easy to grasp but it is important to follow: the tax rate matters.

A great example is Washington, D.C.

Our nation’s capital in 2019 granted itself a sole monopoly over the sports betting market. Washingtonians could only place wagers on one city-owned app; it was a restrictive market, and it kept people away.

In 2024, the average DC adult wagered shy of $83 per year. For a city with a sports team in every major professional league, multiple universities, and tens of thousands of transplants with their own hometown teams to root for, DC was a low-end betting outlier. The app was so non-user friendly, bettors kept their action with their illegal, untaxed bookies. But by removing the city’s monopoly at the end of that year, that number more than doubled. For 2025, the gross gaming revenue average is projected to reach nearly $240.

Black market operators have a monopoly where legal operations are prohibited, and many Alaskans already use illicit or international platforms to gamble. Illicit operators also get a significant advantage when legal, online markets are restricted or overtaxed. These counteract the major goals of establishing legal markets to begin with.

As Alaska debates whether they should be the next state to get a slice of the pie, it’s important to get the details right.

The leading proposal, HB 145, would impose a 20 percent tax on “adjusted gross revenue,” though the bill does not seem to actually adjust for promotional wagers. It would allow up to 10 sports betting platforms to operate in the state, require 3 licensed platforms before operations begin and limit participation to those 21 and older.

HB 145 is a good starting point. It allows for a competitive market and enables protections for consumers, though requiring so many boxes to be checked before setting up shop may discourage platforms from coming to the state and the hard limit of 10 licenses also limits market competition.

Online sports betting is among the fastest growing sectors in the country, and Alaska lawmakers are right to consider joining in the race. For a market that not only works but flourishes, getting the tax mix right is the key to the state’s success.

Jacob Macumber-Rosin is an Excise Tax Policy Analyst with the Tax Foundation.