Since the Supreme Court struck down the Professional and Amateur Sports Protection Act in May, eight jurisdictions outside of Nevada have legalized and/or green-lighted operators for legal sports betting. And the only thing that’s become clear is that one-size-fits-all law does not apply here.
There is no uniformity among the eight jurisdictions. In Arkansas, voters legalized sports betting via ballot initiative on Nov. 6 and will automatically grant licenses to two existing racetracks. And Washington, D.C. created a unique situation in which the DC Lottery will have a monopoly on mobile sports betting.
Tax rates among states with newly legalized sports betting range from a low 9.75 percent (New Jersey) to 51 percent (Rhode Island). Some jurisdictions allow mobile betting and others do not, and some states allow patrons to bet on local college teams while others prohibit placing wagers on any collegiate event taking place within their borders.
Little Uniformity Among State Sports Betting Laws
One state, New Mexico, has legal sports betting at the tribal-owned Santa Ana Star Casino and Hotel, but the state has not legalized commercial sports betting. The only other state with tribal sportsbooks is Mississippi. On the federal level, a “placeholder” bill introduced in December by Senators Orrin Hatch (R-Utah) and Chuck Schumer (D-New York), and this time the feds are not looking to eliminate state-sanctioned sports betting, but rather establish certain “minimum standards.”
Unless or until Congress reaches a consensus on that criteria, states will craft laws and regulations establishing their own standards, tax rates, beneficiaries of that tax revenue, which body will regulate and so forth.
In 2019, it’s likely that many more states will legalize sports betting. As each considers the most suitable way to do so, there is much to be learned from the states that have already legalized.
Pennsylvania was the first state outside of Nevada to legalize sports betting when it did so in October 2017. But it took 10 months for the first casino to apply for a sports betting certificate and 13 for sports betting to launch. Why? Pennsylvania’s enabling legislation sets forth the highest tax rate on gross revenue among states in which sports betting is not regulated by the state lottery. The Keystone State imposes a 34 percent state and 2 percent local tax rate – on top of a $10 million sports betting application fee.
Before the Hollywood Casino in August became the first to apply for a certificate, operators were vocal in their concern about whether they could turn a profit in that sort of climate.
“PNG first notes that the $10 million license fee and 36% tax rate established in the Gaming Expansion Legislation are the highest in the world and may make it impossible for a casino operator to make any return on its investment capital,” Penn National Gaming vice president and general manager Daniel Ihm wrote in his company’s response to the state’s temporary regulations. “Based on the tax rate and the fact that, on average, 95 percent of sports wagers are returned to winning bettors, PNG estimates it could lose approximately 40 cents on every $100 wagered on sporting events.”
Setting Tax Rate Critical
The company’s Hollywood Casino did apply for a sports betting certificate a few months later, and in November became the first Pennsylvania casino to accept legal sports bets.
Seven casinos so far have applied for certificates, five have been granted and three casinos are currently operating sportsbooks. To what extent the weighty PA tax rate impacts sportsbook pricing, product development, and licensees’ ability to market their sportsbooks, remains to be seen.
Lawmakers in states considering legalization in the future are spending considerable time weighing potential tax rates.
“My big comment has been you can’t get too greedy on it because the odds will get out of hand that no one will bet on it,” Montana State Senator Mark Blasdel told Sports Handle. “Maybe in that 10 percent range.”
Blasdel, who is also a member of the state’s Gaming Advisory Council, has requested the drafting of sports betting bills ahead of the upcoming session in hopes of legalizing in 2019.
Washington D.C., which on Dec. 18 became the final locale to legalize sports betting in 2018, created a situation that leaves many scratching their heads. The D.C. Council chose to appoint the DC Lottery as sports betting’s regulatory body, and it gave the lottery a virtual monopoly on sports betting. When sports betting launches sometime in the first quarter of 2019, the only app available for mobile sports betting within the borders of the city will be the DC Lottery app (with exceptions in certain stadia). The concept, according to D.C. Council members, will allow it to maximize tax revenue. But history has shown that monopolies have just the opposite effect.
“While the vote today is progress, we remain deeply concerned about giving the lottery a virtual monopoly in the mobile market,” said American Gaming Association’s senior vice president of public affairs Sara Slane, with regard to the Washington, D.C. law. “Predictably, this will result in less investment and innovation, to the detriment of consumers and the ability of a nascent legal marketplace to compete with the accessibility and convenience offered by many established illegal wagering operations.”
The Council also passed “emergency” legislation on Dec. 18, making sports betting legal immediately. No sportsbooks have opened, the temporary law merely allows the lottery and operators to begin preparing for sports betting sooner than later.
What Sports Betting Looks Like State-to-State
With those examples in mind, here’s a look at what’s what in states with legal sports betting.
TAX RATE: All are based on adjusted gross revenue. In order from lowest to highest:
- Nevada: 6.75 percent
- New Jersey: tiered at 9.75 percent brick-and-mortar 13 percent mobile, 14.25 percent mobile through racetracks
- West Virginia: 10 percent
- Washington, D.C.: 10 percent
- Mississippi: 12 percent
- Arkansas: 13 percent for first $150 million, 20 percent above
- Pennsylvania: 36 percent
- Rhode Island: 51 percent
- Delaware: 50 percent after 12.5 percent payment to Scientific Games is subtracted from total adjusted gross revenue
WHO LAUNCHED WHEN:
- Delaware, June 5, 2018
- New Jersey, June 14, 2018
- Mississippi, Aug. 1, 2018
- West Virginia, Aug 30, 2018
- New Mexico (tribal only), Oct. 16, 2018
- Pennsylvania, Nov. 17, 2018
- Rhode Island, Nov. 26, 2018
- Not yet launched: Arkansas; Washington, D.C.
MOBILE BETTING: Currently allowed throughout New Jersey and legal in Pennsylvania, West Virginia, and Washington, D.C., though not yet launched. A Rhode Island senator is promising legislation in 2019 to legalize mobile sports betting in his state.
LEGAL TO BET ON COLLEGE SPORTS? While it’s legal to bet on college sports in every state with legal sports betting, Delaware, New Jersey and Rhode Island prohibit betting on local college teams.
REGULATORY BODY: Sports betting in Delaware, West Virginia, Rhode Island and Washington, D.C. are all regulated by state lotteries — billed as “partnerships.” Gaming control boards or commissions are the regulating bodies in Mississippi and Pennsylvania, the Department of Gaming Enforcement is New Jersey’s regulator, and the Arkansas Racing Commission will oversee sports betting in that state.