Gambling Taxes and Revenue: How Governments Profit from Betting Activities

girl excitedly counting a stack of money
Written by Sylvester Greer

People gamble for a lot of reasons, but the predominant goal is to make money. It is not just the house and its players profiting from betting activities, though- Governments also take a slice of the pie.

Despite betting dating back to the beginning of humankind’s history books, it is only in recent years that gambling as an industry has become legal in most countries. Only a few countries do not allow legal gambling in any form, most of which are in Asia.

Arguably, the massive potential for revenue through taxation is the main reason global governments have decided to legalize gambling. The gambling industry is worth tens of billions of dollars (yep, billion with a B). It is a number that simply cannot be ignored, and governments couldn’t let such a lucrative cash cow slip through their fingers without taking a bite. 

Whether you are betting on sports with crypto or putting up cash at a poker table, any winnings you earn may be taxable. Understanding how different governments profit from online and land-based casinos gives you a better idea of the way things work and how to manage your winnings.

How Does the US Government Profit from the Betting Industry?

The US is home to the most iconic gambling town in the world. Las Vegas attracts millions of tourists every year, bringing in vast amounts of money to the casinos and the government. Atlantic City is also a major gambling tourist attraction and tax revenue generator for the US. 

Without the legalization and taxation of the gambling industry, billions of dollars worth of government income would be lost. Casinos alone generate around $6 billion. That does not include all other betting activities and online gambling portals.

There is a flat tax fee of 25% on all winnings (cryptocurrency or fiat currency, land-based or online) in US betting. In many cases, the taxes are automatically deducted before payout, and the gambling institution you won it from will pay it on your behalf, but you still need to report winnings to the IRS. If that is not the case, you are responsible for declaring your winnings and paying your taxes.

Because gambling laws are not federal, the legal status of betting activities varies between states. States, including Texas and Connecticut, limit the legal status of gambling and betting to very specific activities and locations, as do several other states.

Overall- between casinos, racetracks, online gambling apps, and sports betting bookmakers- the US government rakes in an incredible amount of tax earnings every year.

How Does the Canadian Government Profit from the Betting Industry?

Canada works a little differently to the US. First, gambling is legal nationwide in Canada- although there are five individual gaming commissions that set more detailed legislation between provinces. Another major difference is the way the government profits through tax revenue.

Unlike the USA, gambling winnings are not considered taxable income in Canada. Because they are not regular (a win on slots, roulette, or Crazy Time can hardly be likened to a regular salary), the government does not include them as stable income and, therefore, does not take tax from it. This is part of what makes the Canadian gambling industry one of the world’s most lucrative.

The exception to this rule is full-time or professional gamblers must pay taxes in the same way any freelance person would. It is up to them to declare total income and pay the necessary taxes.

Canada’s government only profits from revenue taken from casinos and other betting operations- including online gambling platforms based in the country.

How Does the UK Government Profit from the Betting Industry?

Hopping across the pond now to the UK, we find another wildly popular gambling scene. The British government earns around £3 billion (roughly 3.8 billion US Dollars) each year from betting tax revenue, but it doesn’t come from the players.

In the UK, lucky winners get to keep all their winnings- amateur or professional. Gambling sites and institutions do, however, have to pay 15% duties on everything they earn. There are around 150 casinos in Great Britain and more than 8,000 betting shops, and the online gambling scene continues to grow annually.

That means the government still makes a tidy profit, but gamblers get to keep whatever they win- whether it is £1.50 or £1.5 million.

How Does the Swedish Government Profit from the Betting Industry?

We have included Sweden on this list because it is interesting to see how different an approach the country takes. Rather than encouraging growth in the gambling industry to profit more through tax, the government charges significant fees for even a basic gambling license.

To legally operate a gambling site or facility under Swedish law, a five-year license must be bought for the equivalent of around $38,000. After that, you need to pay renewal fees of around $28,000. Bear in mind that only covers your basic gambling license- you need to pay more for sports betting rights, bingo, and some other activities.

On top of that, all gambling income is taxed at 18% of the gross revenue and is paid to the government monthly by every gambling entity. In Sweden, the bulk of the industry operates online, with only land-based casinos in the entire country.

Final Thoughts

No matter where you go, if gambling or betting activities are legal, the government is profiting. Taxing winnings and earnings at casinos, betting shops, and online gambling platforms generates a ridiculous amount of revenue for governments, regardless of how they do it.

In the US, you will need to pay tax on just about everything you win, and the places you win money from are also giving their piece to the tax man. Considering the global gambling industry is worth well over $60 billion, it would be crazy for governments not to take advantage of the potential for tax incomes.

Whether it is the gambler or the gambling organization paying up: the government is the original house, and the house always wins!

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Sylvester Greer

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