Pennsylvania Lawmakers Target Gambling Promo Deductions to Boost Tax Revenue

Closing a Tax Loophole

Currently, online gambling operators in the Keystone State can deduct the full value of promotional credits, such as free bets and deposit bonuses, from their taxable revenue. This has created a large gap between the state’s official 36% tax rate and the 23% effective rate that operators actually pay.

This revenue shortfall has caught the attention of lawmakers in Harrisburg. According to industry analysis from Eilers & Krejcik Gaming, eliminating the promo deduction would serve a dual purpose.

It would bring more tax dollars into state coffers while also potentially reducing the number of “free bet” ads that have drawn media and public criticism.

Industry Warns of “Unfair Tax Hike”

The state’s online sports betting operators are pushing back hard against the potential changes. The Sports Betting Alliance, a key industry group, has framed the move as an unfair tax hike that will ultimately harm consumers.

The alliance argues that Pennsylvania already has some of the highest tax rates in the country. In a statement, the group warned that with “unfair tax hikes, everybody loses – but especially the customers!”

The path to changing this policy in Pennsylvania may be easier than in other states. Unlike in many jurisdictions where tax rules are written into state law, Pennsylvania’s unlimited promo deduction policy is codified in regulations.

This gives lawmakers and other motivated policymakers multiple avenues for change. They could pressure the state’s gambling regulator to amend its own rules, a process that doesn’t require a full legislative vote. Alternatively, they could simply pass a new law that would override the current regulations.