Bettors in California and Ohio, neither of which currently offer live digital sports betting, may have wagered as much as $400 million on Super Bowl LVI if able to do so legally, according to research conducted by Sports Handle. The Super Bowl features a team from each state and will be played in California. Based on a 7% hold and a 10% tax rate, the states combined would potentially have taken in nearly $3 million in tax revenue for the biggest single-day sports betting event in the U.S.
Super Bowl LVI between the Cincinnati Bengals and Los Angeles Rams is set for Feb. 13 at SoFi Stadium in Los Angeles. The game marks the first time an Ohio team will play in the Super Bowl since 1989, and it is the second consecutive year that one team will play in its home stadium. Last year, the Tampa Bay Buccaneers beat the Kansas City Chiefs at Raymond James Stadium as the first NFL team to play a Super Bowl at home.
Ohio lawmakers legalized sports betting in December 2021 and stipulated that the first bets must be taken no later than Jan. 1, 2023. In California, a bevy of gambling initiative proposals are circulating, including one retail-only tribal proposal that has already qualified for the November 2022 ballot, and voters will have a chance to decide whether or not to legalize and how later this year.
But for this Super Bowl, there is little doubt that while bettors can wager legally in more 30 states across the U.S., those in Ohio, California, and other states without live, legal betting will still turn to the illegal market for this Super Bowl.
“I say the only people that are being impacted by [the lack of legal wagering] are people who would benefit from tax dollars and consumers who are betting and don’t have the oversight,” Casey Clark, senior vice president, strategic communications at the American Gaming Association, told Sports Handle. “They are not stopping people in their jurisdictions from betting, they are stopping them from betting legally. Americans all over the country are going to bet on the Super Bowl, whether illegal or legal.”
To put the $400 million handle number into perspective, consider that in Pennsylvania, the biggest state that had a mature market for live digital wagering in the fall, bettors wagered a little less than half that amount every two weeks during the 2021 NFL season, and between $304-$509.5 million during each of six other months of the year.
Also consider that a big handle could very well result in a “bloodbath” for operators on the losing side. That in turn means a state could get no tax revenue from the event.
“I guess the way I would look at it is this, the Super Bowl is the single largest one-day event for sports betting,” Las Vegas-based consultant Brendan Bussmann told Sports Handle. “While states and operators could end up scoring big, they also could take a strong loss, depending on where the wagers come in on the game. It’s potentially a bloodbath.”
Super Bowl hold is volatile
While the Super Bowl is recognized as the biggest single-day sporting and sports betting event in the U.S., predicting how it will play out for sportsbooks is tricky. There are many factors at play, including the location of the sportsbook in relation to the location of the game, how competitive the game is, and if operators experience any technical issues that stop players from being able to wager. That happened, most recently, to Caesars Sportsbook during the first weekend of wagering in New York state, and to at least five platforms during Super Bowl LV.
It should be noted that the Super Bowl win rate fluctuates wildly from state to state, reflecting unique wagering tendencies. The “win rate” or “hold,” as it is known in the industry, is how much money an operator keeps from the bets after paying out winning wagers. For example, the win rate in Nevada for Super Bowl LV was 9.2%, but it was 17.5% in Pennsylvania and 16.8% in Illinois. A higher win rate means higher tax receipts, but when a state or region rallies behind a team, and that team wins, the opposite can happen.
For example, bettors in New Hampshire and the surrounding areas including Massachusetts retained an affinity for former Patriots quarterback Tom Brady and backed the Buccaneers last year against the Chiefs. The result from Brady and the Bucs lifting the Lombardi Trophy was bettors winning $8.8 million on $7.1 million wagered — that’s a hold of -23%, meaning that sportsbooks took a hefty loss on the Super Bowl, and the state of New Hampshire did not get a penny of tax revenue from it.
How projections were calculated
So, how did we come up with how much could have been wagered in live markets in California and Ohio? It wasn’t easy, and for California, in particular, there is no like-for-like comparison for the biggest state by population in America. But let’s start with Ohio, where wagering should be live in time for Super Bowl LVII, set for Glendale, Arizona, which will mark the first time history that the game will be played in a legal, live wagering state. Arizona regulators launched sportsbooks on the first day of the 2021 NFL season, and as you read on, you’ll see that the state by this time next year will meet all the criteria we used in our projections to come up with numbers for California and Ohio.
With states throughout the country legalizing sports betting in recent years, this year’s #Superbowl is poised to smash wagering records. https://t.co/rhPFeCui2X
— iDEA Growth (@iDEA_Growth) February 2, 2022
For projections in both states, we worked on the assumption that the game would be played in a mature market with at least one full NFL season having been played in a legal, live landscape with remote registration ahead of the Super Bowl, that a minimum of 10 digital platforms would be live, that the game would be competitive into the fourth quarter, that all wagering platforms and the live broadcast would not have any major technical glitches, and that operators could not write off promotional play.
The projections also take into account that Super Bowl LVI will be the first one played since the NFL began publicly and aggressively embracing legal wagering. The league reached multi-year deals in 2021 that made Caesars, DraftKings, and FanDuel official league partners, while BetMGM, FOX Bet, PointsBet, and WynnBET are approved sportsbook operators. Since the league’s deals, football handle has increased substantially. In Colorado, one state that breaks out NFL wagering in its monthly revenue reports, handle from September-December more than doubled from 2020 to 2021, from $283 million to $575 million.
Adding it up in Ohio
Let’s start with the size of population. According to the 2020 census, Ohio has approximately 11.8 million people. That puts the Buckeye State in a similar-sized group with Pennsylvania (13 million), Illinois (12.8 million), and Michigan (10 million), all states that have quickly established themselves as top-six markets nationally for handle.
Both Illinois and Pennsylvania have seen monthly handle eclipse $750 million of late, while Michigan became the first state outside the “Big 4” of New Jersey, Nevada, Illinois, and Pennsylvania to surpass $500 million in handle. With notable population sizes comes the potential for large handle amounts. While Michigan sportsbooks took digital wagers on Super Bowl LV, the state had launched operators only a few weeks prior, making it a less apt comparison than Pennsylvania or Illinois.
A second factor is mobile wagering, which now accounts for approximately 90% of overall handle in states outside Nevada. The Silver State has a considerable and vocal casino presence that requires in-person patronage to establish an online account, and Las Vegas sportsbooks still take a substantial amount of wagers in person.
Ohio's Digital Sports Betting To Start By Jan. 1, 2023, But Possibly Sooner https://t.co/GMuUsyDunl
— Sue Schneider (@SuziQSchneider) January 29, 2022
Illinois has been slower to expand its mobile market, currently with six operators accepting wagers and requiring in-person registration at gaming venues until March 5. Because of state government action to allow remote sign-up during the pandemic, Illinois’ growth track as a mature market accelerated and has resulted in the state seeing 96% of handle via online wagering.
When considering Super Bowl handle, past performance may offer a clue to future potential, especially in states with NFL teams. In Pennsylvania, Super Bowl handle grew from $30.7 million in 2020 to $53.6 million in 2021, a near-75% increase. In its first Super Bowl with mobile wagering, Illinois had $45.6 million total handle with five operators, and this year will have six platforms live.
Illinois offers a more like-for-like comparison to Ohio for population size, and a rabid fan base following the Chicago Bears. While the state does not separate wagering by NFL and college, overall handle for football surged 47.9% to nearly $1.1 billion when comparing numbers from September-December in 2020 and 2021.
The belief is the handle generated in Ohio for the Super Bowl would be approximately $90 million, with the potential to reach $100 million should the game be competitive and operators have no technical glitches during the game similar to what occurred last year. The competitiveness of the contest will impact in-game handle as well as the flexibility of operators to offer multiple rapidly evolving markets.
Assuming the $90 million handle and the industry standard of a 7% win rate, operators would claim approximately $6.3 million in gross gaming revenue. The state would get a 10% take, meaning $630,000 in tax dollars. With a $100 million handle, GGR would be $7 million, and the state would get $700,000.
Accounting in California
While the obvious comparison might seem to be New York (20.2 million) — it is the legal sports betting state closest (though not that close) in population — mobile sports betting has only been live in New York since Jan. 8. In the first 23 days of wagering, which included the last regular-season NFL weekend and wild card weekend, more than $1.6 billion in mobile bets were placed in New York. For comparison, the national record for monthly handle was previously $1.3 billion. That $1.6 billion was wagered on six platforms, only four of which were live from the start. The expectation in New York is for a nine-digit Super Bowl handle, despite the short run-up, underscoring the importance of being a large market eligible to wager on the single largest sporting event of the year.
Projecting California’s Super Bowl handle as a mature market rules out New York for comparison purposes, which results in combining the Pennsylvania, Illinois, New Jersey, and Michigan markets as a rough like-for-like. The quartet has a combined population slightly more than 45 million, about 14% more than California.
SuperBowl
New Jersey
2019 $34m handle -$4.5m lost
2020 $54m handle -$4.3m lost
2021 $117m handle +$11.3m winIllinois
2021 $46m handle +$7.7m win being live less than a yearKambi
Highest bet volumes in history and 3x more than last year’s SuperBowl— dividendblower (@dividendblower) February 9, 2021
State agencies in New Jersey, Illinois, and Pennsylvania reported a combined handle of more than $205 million for Super Bowl LV, while Michigan’s handle could be estimated to be between $30-$35 million of the $325 million wagered in February 2021.
Using the same criteria for a fully mature California market as was used for Ohio, as well as accounting for continued growth in the above-mentioned markets, Super Bowl handle in the Golden State could reach $300 million with the caveats of a competitive game not decided until the fourth quarter and an avoidance of technical glitches among operators.
Unlike in Ohio, wagering is not yet legal in California. For the purposes of this projection, we used the 10% tax rate proposed in the statewide mobile betting initiative that Bally’s, BetMGM, DraftKings, FanDuel, Fanatics, Penn National/Barstool Sportsbook, and WynnBET put forth. The proposal allows for an open, competitive mobile marketplace in which digital platforms must be tethered to tribal casinos, and petitioners are still gathering signatures to qualify for the ballot.
Using a 7% win rate once more, operators would then claim approximately $21 million in GGR and the state could potentially take in $2.1 million in tax receipts.
Hometown teams, location would affect handle
Super Bowl LVI marks the first time since legal sports wagering became a states’ rights issue after the Supreme Court in May 2018 overturned the Professional and Amateur Sports Protection Act that a state that has legalized the activity has a team in the game. Ohioans can’t yet bet in a regulated market, but operators are sure to take advantage of free-to-play games and the opportunity to sign up potential players.
The Rams, making their second appearance in the Super Bowl in four years, are the first team in history to have played at home in both the conference championship and Super Bowl. The fact that the game is being played in California and that a California team is in the mix would very likely have had an effect on handle for operators in the state.
“Having an event in your state is an elevator that can probably help raise the level of handle on the game,” Bussmann said. “Additionally, adding a team within the state is going to be another booster. I guarantee when Vegas hosts a Super Bowl in two years will be revenue, revenue, revenue.”
For Ohio operators, the pent-up demand in sports-crazy Ohio over having one of its teams in the game for the first time in 33 years would also surely have had an effect on handle.
“We know that people who are invested in the game will bet more and at a higher rate,” said one operator, who also said that before entering a market operators look at what’s referred to as “propensity to bet.” For example, New Jersey has a high propensity-to-bet factor, while New York’s may have been underestimated. With eight professional sports teams and the highly competitive Ohio State football team, it would be fair to say that Ohio likely has a high propensity-to-bet factor, which could further increase handle.
California, on the other hand, has a massive population but doesn’t share the sports psyche found in the South, Northeast, or Midwest, so the propensity-to-bet factor could be below average, despite the state being home to 18 pro teams and competitive college football and basketball programs from USC and UCLA to Stanford and Cal.
A look at what’s to come
Anecdotally, it’s obvious that most bettors would prefer to wager on the legal market. In every state considering legal wagering, there are always news stories and tweets about and from those who would prefer a market with oversight. In 2020, the AGA released a study that showed that the average spend with illegal bookmakers in legal states dropped by 25% while the spend on legal platforms increased by 12%. As more and more states have come online, it’s probable that those numbers have continued to trend in the same direction.
“Consumer protections and tax revenue are what those states are missing out on, and those should be important,” the AGA’s Clark said about legalizing.
On balance, these projections are a look into the future — not just for California and Ohio, but for every legal sports betting state and any considering it. Three-and-a-half years after PASPA was overturned, the industry has shown continued and sometimes explosive growth. Stakeholders don’t consider a gaming market fully mature until the fifth year, and nearly half of the already legal and live states have a year or less of wagering experience.
As a next-door NFL team heads to the Super Bowl, our neighboring states are soaking up millions in tax revenue and spendable income from Kentuckians while KY Republican leaders sit back and watch.
It's time to get off the sidelines and legalize sports betting. pic.twitter.com/yf3f5C1O7R
— Kentucky Democrats (@KyDems) February 1, 2022
But as handle has soared, GGR and tax revenue have not always moved in lockstep. Generous promotional write-off programs or sportsbook losses often push down projected tax revenue in the early years. But, as they say, you can’t win if you don’t play.
“The challenge you have with any state that does not have legal sports betting — but with a team in the Super Bowl — is you’re missing out on potential tax revenue and regulating what can be and should be a legal form of entertainment,” Bussmann said.
