Strangely enough, the IRS doesn't care whether you bet on sports legally or illegally. They want their cut either way. All gambling income, including lotteries and sports betting, must be reported on your tax return.
The tax rate for the sportsbooks offering legal sports betting, actually originated from the 1951 Revenue Act. It was a 10 percent tax levied against the total sports betting handle.
The original act wasn't really designed to make the federal government money, but to discourage illegal gambling. Currently, individual sports betting tax responsibilities vary according to personal income tax rates, and the tax on sportsbooks is at .25 percent.