Law of Diminishing Returns

When a state legalizes any kind of gaming, one of the main goals is to gather new taxes. The states that have legalized sports betting are no exception. For the most part (with the exception of Pennsylvania and Rhode Island), however, they’ve kept the tax rate low enough that sports books can make reasonable profits in a narrow-margin business. In a report issued by GeoComply last month, a chart on the optimal tax rate was published, showing how returns to the state start to decline as the tax rate goes up.