Analysis | Which states make the most from sports betting? What about lotteries?

When we map that revenue, we find that the states with the highest sports-betting revenue, adjusted for population, tend to be clustered in the Northeast or the Rust Belt. Why is that?

We first looked for answers in New York, which tops the rankings. Somehow Albany rakes in more than a third of total state gambling-tax revenue in the United States.

It’s not that New Yorkers are especially eager to gamble. When you look beyond taxes to the total sum wagered on sports, adjusted for population, Empire State betting ranks well behind Nevada and New Jersey and roughly ties with Illinois, Colorado and Arizona, according to Legal Sports Report, where reporter Eric Ramsey spends much of his time collecting and cleaning a tangle of revenue data from state agencies.

We found the actual answer in a stellar Washington Post story by Danny Funt, a North Carolina journalist working on a book (and newsletter) about America’s haphazard-yet-headlong rush into sports gambling.

In short, New York required companies to pitch tax rates as part of their competition for gambling licenses. And a few firms made the state an offer it couldn’t refuse: They’d pay 51 percent tax on gross revenue. They thought it would guarantee them a bite at the Big Apple and freeze out competitors. Instead, Albany’s massive windfall encouraged Ohio and Illinois to ratchet up their own sports-betting taxes, with other states lining up to follow suit.

Even if super-high gambling taxes catch on everywhere, the Northeast would still stand out for its hefty tax collections. Maybe the upper-right corner of the country just contains more of the types of folks who like to bet money on sports?

Well, probably not. About 26 percent of us have bet on sports in our lifetimes, and 10 percent of us have done so online, according to a March survey from YouGov. Men are twice as likely to have bet as their female friends and three times more likely to bet online.

White and Hispanic people are much more likely to have bet on sports than their Black friends, but that wouldn’t explain why the Great Plains and American West don’t gamble as much. Finally, Republicans are nine percentage points more likely to have bet than Democrats, which doesn’t exactly explain why our nation’s bluest region is also its bettingest.

And it’s probably not that Northeastern or Rust Belt states rely more on betting to shore up their finances. Overall, the $2.5 billion states earned by taxing sports gambling was just 0.17 percent of their tax revenue in 2023. Even with its recent run, sports betting has only just passed drivers’ licenses, or hunting and angling licenses, as a revenue center. Even in New York, it’s just 0.75 percent of tax revenue. .

Much like the majority of gamblers, we were at a loss. So we doubled down.

We widened our net to include state lotteries. With sports gambling still in its toddlerhood, the numbers might skew toward states that were fastest to legalize it. Sports bets have only recently been legalized in 38 states and D.C., while lotteries are legal in 45 states and D.C., and have typically been around for decades.

Furthermore, as our friend Funt noted, sports-betting revenue could tilt toward states with the highest number of big league teams. That’s not a problem with lotteries. We won’t see Michigan’s numbers inflated because the local lottery made it to the, uh, lottery Super Bowl and every Michigoose and Michigander bet the farm on the home team.

We called Jonathan D. Cohen, author of a history of state lotteries in America. Like Funt, Cohen has been grinding away on a book about the sports-gambling boom. He agreed that lotteries, America’s first massive, modern experiment with legal gambling, might hold some clues to the Northeast’s outsize gambling tax haul. Like sports gambling, lotteries were once viewed as states’ fiscal saviors, ways to turn black markets into ready cash that wouldn’t require income or sales taxes, the unpopular workhorses that produce two-thirds of the a state’s revenue on average.

As with sports gambling, men play the lottery more than women, but we don’t see the same political or racial gaps, according to an April YouGov survey. No demographic gaps loom large enough to explain the regional trends.

Also like sports gambling, lotteries provide a rare bright spot on state balance sheets. In 2021, the year of non-fungible tokens and meme stocks, stimulus checks sent lottery sales to their modern high point of almost $400 per American adult, adjusted for inflation, according to the Census Bureau’s annual survey of state government finances.

At least lotteries, unlike GameStop call options, Mutant Apes or CyberKongz, feed directly into state coffers. About 4 cents of every buck we burn on scratchers and Powerball Quick Picks go to running state lotteries and their often-aggressive ad campaigns. (Cohen estimates that almost two-thirds of lottery revenue comes from scratch tickets.) Another 67 cents get paid out to winners. That leaves 29 percent for states.

It sounds impressive, but the $28 billion states got from lotteries in 2022 would be equivalent to less than 2 percent of total state tax revenue.

As in sports gambling, top lottery states have something in common: geography. The heavyweights start with the usual suspects — such as Massachusetts and Rhode Island — but then spill out beyond the Northeast and the Rust Belt. In fact, they run all the way south along the East Coast.

What unites these states? We had no idea.

Until we found Russell DeSimone in Middletown, a Rhode Island town in the middle of a Newport and Portsmouth sandwich. DeSimone, who wrote a magical article on Rhode Island’s lottery-mad history, has spent tens of thousands of dollars on lottery tickets.

That may seem like an odd activity for a retired mathematician who, of course, knows the odds.

Even odder? None of the tickets were winners. In fact, they were expired. Super-duper expired.

“I knew I wasn’t going to win anyway,” the 79-year-old told us, “so let me buy something that’s a couple hundred years old, and that puts a smile on my face.”

DeSimone’s collection of colonial and early American lottery tickets would become one of the nation’s most impressive — and illuminating. In the days before income or payroll taxes, before the United States even had a real bank, lotteries ruled Earth. If you had to scrape together enough money to pave the street from the courthouse to the jail in East Greenwich, arm a fort on Goat Island, prospect for coal in Cumberland or build a schoolhouse in South Kingstown, you applied for official approval and started selling lottery tickets.

Alas, the contests grew scandalously corrupt, and state after state banned lotteries as the 1800s dragged on. Most Western and Plains states came of age when games of chance were verboten. But in the 13 colonies and their well-established neighbors along the Great Lakes, a love of the lottery seems to have lingered.

“Lotteries are pretty much an East Coast phenomenon until the 20th century, and then in every state, the greedy little general assemblies say, ‘Wow, we can make some money here,’” DeSimone said, pronouncing that last word such that we have little doubt he was born and raised in the Ocean State.

Cash-strapped, tax-phobic New Hampshire brought the lottery back in 1964. Neighboring states watched Concord cash in and wanted a piece of the action. By 1972, New York, New Jersey, Connecticut, Pennsylvania and Massachusetts were all onboard. Rhode Island joined soon after, and lotteries sprawled beyond the Northeast.

Indeed, the historical connection seems crucial. When we compared when a state was founded with its per-adult lottery spending, we saw the strongest relationship of any variable we considered. It’s not perfect, but we can make a case for it anyway!

“Maybe it’s coincidence,” Cohen said, “but I don’t think it’s crazy to say there is a colonial history of lotteries and, lo and behold, the colonial states have the highest per capita lottery sales.”

It’s certainly not an airtight explanation. But it’s a fun one, and economists often find that long-lost influences — obsolete river portages, long-closed missions, hookworm eradication — can produce unexpected effects that reverberate to the present day. Of course, that’s true for good or ill. And with gambling comes plenty of ill.

As Cohen reminds us, both lotteries and sports gambling “were enacted with very little, if any, regard for the scourge of problem gambling — and the fact that at least 1 percent of Americans, even before legalization, had a gambling problem.”

DeSimone, the mathematician turned lottery collector, brought up the same subject.

Lotteries “prey upon those that can ill afford it,” he told us. “If you are down and out and you’re never going to see daylight, you say, ‘Well, I might as well buy a ticket. Maybe I’ll hit it big.’”

“It’s a sick, sick thing,” he added, “but it’s a wonderful history to tell.”

Hi! Hello! Howdy! The Department of Data covets your queries. What are you curious about: What states earn the most from taxing marijuana? What about liquor and tobacco? How has rush hour changed since the coronavirus pandemic? Just ask!

If your question inspires a column, we’ll send you an official Department of Data button and ID card. This week’s buttons go to persistent PR pitchman Justin Baronoff, who put the Census Bureau tax data on our radar; R. Douglas Daligga in Okemos, Mich., who asked how much states make from sin taxes, and how much of their revenue it makes up,; and Paul Dent in San Francisco, who asked about gambling, lotteries and political affiliation.