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It has been almost a year and a half since Virginia has launched its legal sports betting market and so far the results have been impressive, with Old Dominion now joining eight other U.S. states that have surpassed the $5 billion handle mark since beginning their operation.
A sports betting handle represents the amount of wagers placed in a market over a certain period of time, and New Jersey, Nevada, Pennsylvania, Illinois, Indiana, New York, Colorado, Michigan, and now Virginia have each generated $5B worth of total action in their state.
Keep in mind that $5B handle in Virginia was generated completely online, as right now it is a mobile-only market when it comes to taking sports wagers, their retail and casino operations still being developed with an expected launch date of either late 2022 or sometime in 2023.
That large Virginia handle resulted in a considerable boost in tax revenue, their 15% rate on sportsbook income about average for the industry, but up until recently those operators were using what’s known as the ‘freebie loophole’ to avoid paying a full and fair amount of taxes.
When a legal sports betting market launches, the first goal is to collect new customers who enjoy gambling on games and players, so the sportsbooks use clever marketing tactics to attract potential bettors, and nothing appeals to sports gamblers more than free money.
That’s why in Virginia sportsbooks like DraftKings and Caesars offer new customers generous freebies that brought millions of punters into that mix, the upside of those giveaways being that the state would not tax them but only tax whatever revenue is left afterwards.
As a result, a large portion of that potential tax revenue had gone uncollected, $26.7M worth, and as we reported recently, the Newest Virginia State Budget Limits Sports Betting Freebie Loophole, a move meant to put a time limit on those giveaways that have cost the state millions.
So now in Virginia, sportsbooks will only be allowed to deduct those freebies and giveaways from their pre-tax revenue for the first 12 months that they are in operation, and then after that they will be required to pay their fair share.
It will most likely still be worth it given how quickly that Virginia market is growing.
One way states measure the growth of their new legal sports betting markets is by comparing current handle numbers to the same time period the year prior, and in 2022 VA has enjoyed a $2.1B handle increase from Jan-May (93%) over what it generated during that stretch in 2021.
Virginia currently hosts 14 licensed mobile operators, about double the number from a year before, and as the ‘freebie loophole’ inevitably closes for each of these sportsbooks, expect those revenue numbers to continue rising, money that benefits residents in different ways.
98% of the tax on adjusted gross revenue in Virginia is earmarked by the legislation to be paid into the state’s general fund and 3% of that will be put towards the Virginia Department of Behavioral Health’s Problem Gambling Treatment and Support Fund.
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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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