NCLGS Model Legislation Suggests iGaming Tax Rates and Sweepstakes Ban

The National Council of Legislators from Gaming States (NCLGS) has released its draft model legislation aimed at helping states develop robust frameworks for online gaming regulation. Following months of work, the draft is now open for public , with a goal to assist state lawmakers in crafting tailored iGaming policies.

The proposed legislation offers a detailed blueprint, emphasizing adaptability to each state’s gaming infrastructure. NCLGS highlights key principles in the draft, such as avoiding the cannibalization of retail gaming, enforcing rigorous regulatory standards, safeguarding players, and maintaining harmony with tribal gaming and state lottery operations.

Key Tax Recommendations for iGaming

Among the central components of the draft is a recommended tax rate for iGaming operators. NCLGS advises states to impose taxes ranging between 15% and 25% of adjusted gross revenue. This range, according to the council, strikes a balance between maximizing state revenues and maintaining competitiveness with other jurisdictions. The council cited the U.S. average iGaming tax rate of 19%, excluding Pennsylvania’s 54% rate on online slots, as an indicator of varying state approaches.

The draft also introduces the possibility of a graduated tax structure. Examples include Michigan’s sliding scale for online gaming revenues and Illinois’ tiered system for sports betting, which reaches up to 40% for top-earning operators. Contrasting proposals, such as Ohio’s suggested 15% tax rate for online casino expansion, underscore the diversity of legislative strategies across states.

Addressing Sweepstakes and Licensing

A significant aspect of the draft addresses online sweepstakes casinos, which have been a contentious issue in 2024. To eliminate legal ambiguities, the draft explicitly defines and prohibits such operations. Sweepstakes entities—including games that mimic casino-style gaming while awarding prizes based on chance—would face fines of $10,000 to $100,000 per violation, along with potential license revocation.

For existing license holders, the legislation proposes streamlined licensing processes. Operators with valid sports betting licenses in good standing may undergo an abbreviated application procedure. Additionally, the draft endorses multi-brand licenses, mirroring successful models like Caesars Digital’s operations in various states.

Player Protection and Responsible Gaming

The draft legislation places a strong emphasis on responsible gaming measures. Proposals include mandatory player health programs and guidelines for creating self-exclusion systems. These initiatives aim to ensure operators prioritize player well-being alongside regulatory compliance.

Moreover, the council s participation in the Multi-State Internet Gaming Agreement (MSIGA). Currently, MSIGA allows poker platforms to connect players across multiple states, including Nevada, Delaware, Michigan, New Jersey, and West Virginia. Expanding this cooperative framework could further enhance player experience and market potential.

Next Steps

The NCLGS draft invites stakeholders and the public to contribute , enabling refinements before potential adoption. By providing a comprehensive and adaptable legislative model, the council aims to states in developing effective and secure iGaming markets.

Sources:

NCLGS Model Internet Gaming Act [pdf], National Council of Legislators from Gaming States, November 26, 2024.