If legal mobile sports betting platforms launch in Maryland during the 2022-23 NFL season, it’ll likely be in the postseason, perhaps shortly before the Super Bowl. That means, despite voters legalizing sports betting through a 2020 referendum, another football season could pass without available mobile sportsbooks.
Retail sports wagering options launched in December of 2021 at five Maryland casinos, so there are legal in-person sports betting options available to Marylanders. Regardless, the majority of bettors in most states use mobile platforms rather than going to physical sportsbooks to place wagers.
No available legal mobile platforms this fall means Maryland is missing out on tax revenue.
Retail betting generates some tax revenue
In Maryland, tax revenue generated from sports betting goes to the Blueprint for Maryland’s Future Fund, which puts money toward improving public education in the state. Maryland taxes gross sports betting revenue at 15%, and through July, $3.2 million has been raised for the fund through sports betting since retail locations launched in December of 2021.
Mobile sports wagering would significantly increase Maryland’s tax revenue generated from sports betting, as it’s the preferred method of wagering for most bettors. Sports Wagering Application Review Commission Chairman Thomas Brandt values the need to move efficiently on mobile betting, and he recently sent a letter to the state’s Joint Committee on Administrative, Executive, and Legislative Review (AELR) pleading for a quick approval of the SWARC’s emergency sports betting regulations.
“Marylanders have been waiting for mobile sports wagering for more than a year since the sports wagering law was passed,” Brandt wrote. “The Blueprint for Maryland’s Future Fund is awaiting the revenue that sports wagering will contribute to public schools. But none of this can happen until AELR acts on our proposed emergency regulations. Again, on behalf of SWARC, I respectfully request that AELR render its decision promptly.”
Maryland just missing out on money by living in the Victorian era of sports betting.
— Matt Wise (@TheMattWise) August 27, 2022
Millions in unrealized tax revenue
So just how much tax revenue is Maryland leaving on the table by missing out on another football season?
Let’s use Colorado and Virginia as points of comparison. Colorado has a sports wagering tax of 10% on adjusted gross gaming revenue, and there are over 25 mobile operators operational in the state. Maryland will allow for up to 60 mobile sports betting licenses. Additionally, Colorado’s population was 5.7 million as of 2020, while Maryland’s was 6 million, hence the reason for comparing the two states.
From September 2021 through February 2022 — football season — Colorado generated $167 million in gross gaming revenue, resulting in $6.2 million of tax revenue. Promotional deductions reduced the state’s tax revenue generation during that time period.
In that span, nearly $750 million was NFL-specific handle that generated $37.3 million in gross operator revenue, a figure that includes a net loss of $2 million in February as bettors began cashing winning Super Bowl futures tickets. It is also worth noting the 5% win rate Colorado sportsbooks generated for NFL betting is two full percentage points below the industry standard of 7% when it comes to overall handle and revenue expectations.
If Maryland’s 15% tax rate is applied to that gross revenue for NFL betting, the result is nearly $5.6 million in receipts. If the full $167 million in gross gaming revenue is taxed at the 15% rate, Maryland would receive $25 million in tax revenue, minus any allowed promotional deductions.
Virginia, which only has mobile sports betting and a 15% tax on adjusted gross revenue, received $13.5 million in tax revenue from sports betting from September 2021 through February 2022. The state has a larger population than Maryland, though, with 8.5 million people, and Virginia also benefits from bettors crossing the Maryland and Washington, D.C., borders to place legal mobile bets, as Maryland doesn’t currently have legal mobile betting and Washington D.C.’s sports betting system is a mess.
Virginia, like Colorado, leaves significant tax revenue on the table through promotional deductions. In the entirety of 2021, Virginia operators reported gross gaming revenue of $285.9 million. A 15% tax on that $285.9 million would have yielded a total of $42.9 million in tax revenue. Again, that’s likely a high estimate for Maryland given its population difference with Virginia.
Viewing the same September to February span in comparison to Colorado, overall handle in Virginia surpassed $2.4 billion. Based on an internal Sports Handle estimate, as the Virginia Lottery does not provide handle and revenue figures by sport or operator, approximately 37.5% of that handle — $900 million — was likely generated by football.
Further, NFL handle is estimated to be 75% of all football handle, which means NFL-specific wagering could have reached $675 million in that span. Virginia operators posted an 8.5% overall win rate on wagers placed from last September through February — notably higher than the industry standard of 7%. If that 8.5% win rate is applied to football wagering, operators could have claimed $76.5 million in gross revenue from football, including $57.4 million on NFL wagering independent of parlays.
Using Maryland’s 15% tax rate would result in receipts totaling $11.5 million for all football wagering and $8.6 million for NFL betting, respectively, in that six-month period. Applying the standard 7% win rate, those tax revenues drop to $9.5 million and $7.1 million.
While it’s impossible to perfectly project unrealized tax revenue, using Colorado and Virginia as a guide gives us a general estimate of potential tax revenue Maryland is missing out on. Our conservative estimate suggests if legal mobile sports betting platforms don’t launch in the state during the 2022-23 NFL season, Maryland could miss out on roughly $10-20 million in tax revenue over the next six months.
Chris Altruda contributed to this report.