Rhode Island Eyes Six-Operator Sports Betting Market and Dramatic Tax Cut to Stem Bettor Exodus

Rhode Island Weighs Market Expansion and Sharp Tax Reduction in Sports Betting Overhaul

Rhode Island, the smallest state in the United States by land area, is considering one of the most significant restructurings of its sports betting framework since the activity was legalised, with proposed legislation that would both widen the competitive landscape and dramatically reduce the fiscal burden placed on operators.

From Two Operators to Six

Under the current arrangement, Rhode Island’s online sports betting market is served by just two licensed operators — a figure that critics argue has left local bettors with far fewer choices than residents of neighbouring states enjoy. The proposed legislation would raise that ceiling to as many as six licensed online operators, effectively tripling the number of platforms available to Rhode Islanders wagering from their phones or computers.

The move reflects a growing recognition among state officials that a restricted operator environment does not simply limit competition — it actively pushes bettors towards out-of-state platforms. According to reports, lawmakers are increasingly concerned that Rhode Island residents are crossing state lines, both physically and digitally, to place wagers with sportsbooks that are unavailable at home.

A Tax Rate Among the Steepest in the Nation

Perhaps the more striking element of the proposed overhaul is what it would do to the state’s revenue share structure. Rhode Island currently imposes a 51% tax on sports betting gross gaming revenue — one of the highest rates applied anywhere in the country and a figure that operators have long flagged as an impediment to meaningful market investment.

The proposed restructuring would not simply reduce that rate outright. Instead, it would trigger a stepped reduction to 12% once the state has collected the equivalent of its full-year haul from fiscal year 2025. For the remainder of that fiscal year, the lower rate would then apply. The mechanism is designed to give the state confidence that its near-term revenue baseline is protected before the more competitive tax environment kicks in.

The gap between 51% and 12% is considerable by any measure. For context, most competitive sports betting markets in the United States operate with effective tax rates in the teens or low twenties. A rate above 50% leaves operators with constrained margins, limiting their ability to offer promotional activity or invest in the product improvements that retain users — precisely the dynamic, according to reports, that has been accelerating Rhode Island’s bettor attrition.

The Border-Crossing Problem

The underlying driver of the reform push is a familiar one for tightly regulated, high-tax markets: leakage. When bettors can access a broader range of platforms with more competitive odds and promotions simply by crossing into Massachusetts or Connecticut, the home state’s tax receipts suffer regardless of how high the nominal rate is set.

Rhode Island’s situation is acute given its geography. Bordered by two states with more open and competitive sports betting ecosystems, it faces a structural disadvantage that no amount of rate-setting can fully overcome unless the product offering itself becomes more attractive.

What Comes Next

The legislation is still working its way through the state’s lawmaking process, and the final shape of any reform — including the precise operator cap and the exact tax trigger mechanism — could yet change. Nonetheless, the direction of travel appears clear:

• Expand licensed operators from two to up to six
• Retain the existing 51% rate until FY2025 revenue benchmarks are met
• Reduce the rate to 12% for the balance of the fiscal year thereafter
• Improve product competitiveness to reduce cross-border wagering activity

Should the proposals pass broadly intact, Rhode Island would shift from being one of the most restrictive sports betting environments in the country to something considerably closer to the mainstream — a notable pivot for a state that has historically favoured a cautious, controlled approach to gambling expansion.

Sources

• Rhode Island Lawmakers Mulling Sports Betting Expansion