Given recent financial figures, changes could be coming to sports wagering in Virginia. Mobile sports wagering operations launched in Virginia in January of 2021, and the state has left potential tax revenue on the table due to promotional tax deductions.
Virginia allows sports betting operators to deduct promotional expenses from their tax obligation, incentivizing operators to offer risk-free bets and sportsbook bonuses to attract customers. While the free bets may succeed on that front, they also limit the tax revenue the state receives.
Sports Handle’s Chris Altruda reported that in the first three months of 2022, just over 40% of the $100 million in gross revenue was eligible to be taxed by the state.
Running 2022 #SportsBetting numbers thru Virginia on April 29:
GGR Win Rate: 6.0947%
AGR Win Rate: 4.858%
— Chris Altruda (@AlTruda73) April 29, 2022
The Richmond Times-Dispatch found that sports betting companies in Virginia offered just under $170 million in bonuses and promotions since sports wagering was launched in the state, and while Virginia has collected $26.7 million in tax revenue since launching, it’s missing out on potentially much more. The Times-Dispatch also reported that only five of the 12 active operators have paid taxes since launching in Virginia.
Clearly, promotional tax deductions are keeping Virginia from receiving millions of dollars in additional revenue.
Could change be on the horizon?
Del. Mark Sickles attempted to change the tax deduction rules through HB 1103 early this year, but his bill failed to make it out of the House General Laws Committee. Sickles wanted to limit how long operators could deduct promotions from taxable revenue.
“After the first 12 months of wagering activity, a permit holder is prohibited from excluding from adjusted gross revenue any bonuses or promotions provided to bettors as an incentive to place or as a result of their having placed internet sports betting wagers,” language in the bill said.
Sickles’ bill would allow operators to attract customers with free bets for their first year of operation in Virginia before making those operators pay taxes on bonuses and free bets after their first year. While the bill failed, the desire to reduce or eliminate promotional tax deductions could grow stronger among legislators as additional revenue reports come in each month.