The American Gaming Association (AGA) wants to repeal or reduce the federal excise tax on sports betting, a highlight among post-PASPA priorities released Thursday by the group.
Gaming’s lobbying arm also encouraged federal lawmakers to let state and tribal authorities set their own sports betting rules. That backs comments AGA President Geoff Freeman made after PASPA’s repeal, saying “that ship has sailed” on federal legislation.
AGA’s priorities also include creating a national sports-betting data repository to help law enforcement, casino operators, and sports leagues monitor suspicious activity.
AGA turns to federal excise tax after death of PASPA
Freeman’s letter to federal legislators lays out the AGA’s preferred guidelines, but its most interesting ask comes at the end. In a section discussing potential next steps, Freeman implores Congress to examine the 0.25 percent federal tax on handle.
For its part, one notable example where Congress can make an immediate impact is reexamining the federal excise tax currently levied on sports wagers. This 1951 tax was originally intended to serve as an enforcement tool against illegal gambling, but instead hinders the ability of the legal market to compete with illegal operations that do not pay any taxes.
The federal excise tax, then and now
As Freeman references, the tax came into existence in 1951 as a method of helping states crack down on gambling activity. At 10 percent of handle, the tax crippled most operators and chilled potential new operations.
Congress reduced the tax from 10 percent to 2 percent in 1974, ushering in a boom of sports betting in Nevada. A further cut to the current amount came in 1984.
The federal cut of sports wagers could have reached more than $10 million in 2017 if Nevada’s handle reached $5 billion. That figure barely creates a ripple in the massive federal budget, but every drop of tax revenue will matter as states create sports betting legislation.
Putting a few million dollars back into the pie could allow sportsbook operators to offer more competitive prices, especially in states with outsized taxes like Pennsylvania.
The rest of what AGA wants from legislators
An AGA press release laid out five priorities for lawmakers:
- Allow states to legislate and regulate sports betting. This idea continues: “AGA will also combat any attempts by the federal government to neuter state regulatory power.”
- Place consumers first by offering strong protections and allowing in-state mobile betting.
- Strengthen game integrity by establishing strong sports betting regulation and a national data repository.
- Promote responsible gaming and responsible advertising by setting up responsible gaming programs wherever sports betting is legalized. This includes the creation of a self-regulatory advertising model within the industry.
- Encourage contracts over statutes, a priority seemingly targeted at leagues pushing for integrity fees and data rights through state legislatures.
The aim of the letter is to offer guidance to lawmakers as sports betting expands in the United States. AGA spokesperson Caroline Posenti elaborated to PlayUSA:
“AGA’s goal in this letter is to engage in a constructive conversation with Congress on ways to empower the legal sports betting market, like taking a thorough look at the efficacy of the excise tax.”