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As more and more U.S. states begin to launch their own legal sports betting markets, industry insiders have weighed in on how they prefer these new operations to look, including how much of a tax rate a state should charge sportsbooks on revenue, and which works best for all.
At the end of 2021, VIXIO teamed up with SBC Summit North America and surveyed sports betting industry executives and found that 29% of them were not fans of the way New York imposes the highest rate in the industry, a 51% charge on sportsbook revenue.
Of course, that means 71% of them saw some merit in creating such a high cost of doing business for sportsbooks, with opinions varying as to whether it leads to a better market for the customers or for the operators, and which side should be prioritized in each state.
Sports betting tax rates range from 6.75% in Iowa and Nevada to 51% in New York and New Hampshire, with most states settling somewhere between 10 -2 0%, a choice that comes down to a basic math question – which rate generates the best return on investment for the state?
It’s a question that at least four new states and their lawmakers may have to answer sometime in 2022.
At this point in the U.S. legal sports betting journey, over thirty states and Washington D.C. have set up some form of operation for their residents, and in 2022 there are four states on the cusp of doing the same, with California, North and South Carolina, and Massachusetts maybe joining.
Those four states are most likely crunching the numbers and trying to figure out which of the existing sports betting models is working the best for everyone involved – huge profits are not sustainable if the customers and sportsbooks are miserable, but states do have to make money.
The two states with the highest sports betting tax rates have generated impressive handles and resulting revenues, with New York’s handle so far at $7.9 billion with $274 million in tax revenue and New Hampshire with a $1.3 billion handle and a $39 tax revenue stream so far.
Compare that to the states with the lowest rates – Iowa so far has generated a $3.9 billion handle and $17 million in tax revenue and Nevada has created a $24 billion handle which has resulted in $92 million worth of tax revenue.
A state like New Jersey might have a decent sports betting model to emulate, with a $14.25% tax rate that state has generated a $27 billion handle and made $229 million in tax revenue, but other factors such as population, attitudes towards gambling, and location also come into play.
That same VIXIO survey also had sports betting executives predict which markets would dominate by 2025, and those industry insiders picked California and New York to top the list, two states blessed with large populations and huge cities that help to fuel the action.
In the meantime, states new to the legal sports betting game will be forced to either bet high or bet low or somewhere in between on their tax rate, and the customers will let them know if they chose correctly because they will flock to whatever situation gives them the best chance to win.
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Mike Lukas is a retired standup comedian turned freelance writer now living in Dallas, Texas, originally from Cleveland, Ohio. His love for the game of football and all things Cleveland Browns turned Mike into a pro blogger years ago. Now Mike enjoys writing about all thirty-two NFL teams, hoping to help football gamblers gain a slight edge in their pursuit of the perfect wager. Email: [email protected]More info on Mike Lukas
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