Why is Sports Betting Tax Revenue Low for Most States?
When the Supreme Court struck down Nevada's monopoly on sports wagering, state legislators began to lick their lips at the potential cash cow that gambling on games could bring their state.
But as we sit here, a year removed from when most states adopted sports betting, legislators have yet to see the expected fruits of their labor.
In four of six states that adopted sports gambling soon after the Supreme Court judgment, tax revenue fell well below projections.
The problem for states that are struggling to balance their budgets is when one projection falls short, then the money has to come from elsewhere.
Perhaps the biggest cautionary tale for adopting sports gambling, especially in smaller states, is the story of Rhode Island.
When the state passed their bill, legislators pegged tax revenue at close to $1 million per month.
But when the dust settled after the Super Bowl, the actual revenue sat around $50,000 per month.
Governor of Rhode Island, Gina Raimondo, understands that the state budget will have to absorb the hit but doesn’t believe that makes sports betting in her state a loser long term.
“We knew it was going to be very up and down. That is not at all a surprise,” Raimondo told the Associated Press.
Other states affected by dramatically reduced tax revenue includes West Virginia, a state seeing only a quarter of their early projections.
Also affected are Mississippi and Pennsylvania who both are operating at roughly half of the money each state expected to see from sports betting.
So Why is New Jersey Meeting Their Estimates?
If there is a success story from a state that adopted sports betting quickly, then New Jersey has to step up and take the prize.
With its proximity to non-betting New York, the sportsbooks in New Jersey have cleaned up in their first several months of existence.
From July of 2018 through the Super Bowl, New Jersey sportsbooks took in over $1.25 billion in sports wagers.
New Jersey’s success has primarily come from the initial adoption of mobile phone use for placing bets.
Most states that have struggled to generate expected revenue has failed to allow their residents and visitors to place bets on smartphones.
Where Does New Jersey’s Revenue Come From?
As it stands, roughly 9% of bets placed in Jersey are by New York residents coming over the state line.
With the New York legislation struggling to adopt a universal sports wagering plan, expect that number to stay strong in coming months.
Another neighboring state, Pennsylvania, brings 4% of the overall take of Jersey sportsbooks.
But that revenue is in jeopardy as Pennsylvania readies their own app to be used for online gaming within the state.
One way New Jersey plans to keep the amount wagered strong and in line with what is bet each month in Vegas is by expanding the locations where people can place a bet.
Experts believe that New Jersey could have more than 20 betting locations within the state by the end of 2019, further driving up revenues and filling the state's general fund.
As more and more states begin to adopt measures that will bring sports betting to their state, legislators would be wise to look at what New Jersey has done to succeed.