When the Supreme Court killed PAPSA in May 2018, it birthed a whole new world of legal sports betting in America. And along with it, many questions.
What would the landscape of sports betting look like outside of Nevada? Which would be the first states to legalize? How big of a role would online betting play?
The new world is still being built but there are some early answers.
The numbers for the first full year of post-PAPSA sports betting are in. The American Gaming Association reported Americans bet a record $13 billion in 2019, nearly double 2018’s $6.6 billion handle. The record figure generated $118 million in state and local tax revenue.
American Gaming Association SVP of Government Relations Chris Cylke commented:
“We are expecting handle to increase year-over-year. We are still very much in the initial stages of the legal market cutting into what was mostly being done illegally. Overall we are encouraged. From our perspective, there is a long way to go but things are trending in the right direction.”
State rankings for sports betting
Fourteen states now offer sports betting. Of the $14 billion in 2019, 59% was wagered outside of Nevada. The AGA says the expansion of sports betting has not come at the expense of Nevada since it posted a record $5.3 billion handle last year.
2019 state-by-state sports betting handle:
- Nevada: $5.3 billion
- New Jersey: $4.6 billion
- Pennsylvania: $1.5 billion
- Indiana: $436 million
- Mississippi: $369 million*
- Rhode Island: $246 million
- West Virginia: $226 million
- Iowa: $212 million
- Delaware: $103 million
- Oregon: $45 million*
- Arkansas: $11 million
- New Mexico: N/A*
- New York: N/A*
- Sports betting launched in New Hampshire on Dec. 30, 2019.
*Handle from NY and tribal casinos in MS, NM, and OR is not publicly reported.
At least six more states in addition to Washington D.C. will join the sports betting fray in 2020.
Mobile drives betting
In markets outside Nevada, bettors wagered 7 out of every 10 dollars online. In December, 87% of wagers in Pennsylvania were placed on online betting apps.
Why the preference for online? Cylke pointed out it has a history in Europe as the preferred avenue of sports betting. Also, New Jersey, the first state outside of Nevada to implement legal sports wagering saw a preference toward online.
The convenience of being able to place a bet at the palm of your hand is now the expectation.
“We have a longer track record now to look at the jurisdictions who are offering mobile wagering and see the success they have versus those that do not which are a little more stagnant.”
Tax rate for sports betting highest in PA
Pennsylvania imposes the highest tax rate for sports betting at 36%. It’s four times the rate of New Jersey. The tax rate on gross revenue is in addition to the one-time fee of $10 million for a sports betting license in Pennsylvania.
“Marketplaces like Pennsylvania where you have a big state and an established gaming industry, operators largely held their nose and paid the fee, notwithstanding the tax policy in place hoping to work on that at a later date because it’s important to get a foothold into a market like PA.”
Cylke says a similar model in other jurisdictions would not be sustainable:
“Sports betting is a low margin business compared to other games offered by operators. You have the looming competition from the illegal market so it makes the numbers tough in terms of being able to turn even a modest profit as a legal operator. In order to turn a profit you may have to adjust lines and payouts which only empowers the illegal market to come in and offer a more compelling proposition to consumers.”
Pennsylvania sports betting: A look back and a look ahead
Sports betting came to Pennsylvania in Nov. 2018. The first full year of 2019 started with only three retail sportsbooks. Mobile wagering did not come to the Commonwealth until the end of May.
Over the summer more online sportsbooks launched to be ready for the start of college and pro football. As of February 2020, Pennsylvania sports betting consists of eight online options and 12 retail sportsbooks.
From July to December, the amount of wagers placed in Pennsylvania increased 477%.
Chris Krafcik, Managing Director of Sports & Emerging Verticals at Eilers and Krejcik commented on the future of handle and revenue in 2020 and beyond. He predicts a continuation of the current balance of online vs. retail. He also sees the 2019 revenue of $84,112,967 multiplying by seven- to eight-times eventually.
“We expect the Pennsylvania sports betting market to generate total revenue of between $600m and $700m once mature, with the bulk of that total—or 85%+—coming from the online channel.”
PA sports betting future projections
By our calculations, PA sports betting could bring in somewhere in the neighborhood of $4 billion to $6 billion in handle, and between $275 million and $350 million in revenue in 2020. And it’s only the first full year with full-fledged online wagering.
In sum, the future looks hopeful for PA sports wagering, although reducing the tax rate would go a long way toward operators’ abilities to offer competitive products in the Commonwealth.