Differing Approaches to Taxing Sports Betting States should consider the fiscal impact of regulation on lawful operators to encourage operation within their borders to best maximize those desired tax dollars. Operators in unregulated markets don’t absorb such high costs and can more easily offer consumers a more competitive product, which further drives down margins for licensed, authorized businesses. To operate in this highly regulated industry comes at a significant regulatory price via licensure fees and taxes, as well as costs associated with compliance and responsible gambling requirements. Aside from typical operational costs, expenditures toward customer acquisition have curtailed profitability. Of that revenue, high costs of operation must be paid. The hold, or revenue actually kept by the sportsbooks, is but a fraction of the handle generated. Much of the handle is returned back to the customers. The reported billions of dollars in wagers appear to indicate the activity’s popularity but do not tell the complete story with regard to the operators’ ultimate profit. Betting on a Low-Margin Businessĭespite the huge numbers associated with sports betting handle, profit margins for operators are quite low. Massachusetts, the latest state to enter the market, hopes to emulate the success of New York when it launches-likely in 2023. New York joined the online sports betting fray in January 2022, reporting $1.67 billion in sports wagers placed in its first month, which is notable because it was truncated by a Jan.

New Jersey, the state behind the PASPA case, has since authorized both retail (brick and mortar) and online/mobile sports betting, and is seeing average total wagers, or handle, of $1 billion per month. This multibillion-dollar backdrop supported efforts to consider the opportunities available to derive tax revenue from a newly authorized industry. While the PASPA case was pending, the American Gaming Association said that at least $150 billion was being illegally wagered on sports betting in the US each year. The appetite for such wagering became apparent in many jurisdictions, as well as the desire to add much-needed revenue to state coffers. With PASPA invalidated, each state could determine if, when, and how to legalize and regulate sports wagering. WATCH: Sports Betting: Bill Bradley, SCOTUS & the $19 Billion Bet for States

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