A Breakdown Of US Sports Betting’s $3 Billion Dollar First Year

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Two decades ago, if you would have said that sports betting would be legal outside of Nevada someday, the response likely would have been that Cleveland Browns have a better chance at winning the Super Bowl.

But May 14 marked the first anniversary of legalized sports betting outside the state of Nevada. With the Browns’ recent player acquisitions, their shot at a title isn’t out of the realm of possibility.

For those out of the loop, the Browns managed to acquire two of the top wide receivers in the NFL. They also have a flashy new quarterback and a stable of young talent. On paper, the Browns are stacked–just like legal sports betting.

So, here we are — one year in the making

Following the US Supreme Court’s landmark decision on May 14, 2018, these states legalized sports betting over the next few months:

The first sportsbook went live outside of Nevada in June 2018. Since then, the six states have combined to generate $3,313,282,481 in sports betting handle, according to data compiled from each state’s gaming commission.

StateStart DateTotal HandleTaxable Revenue
New JerseyJune 2018$2,638,367,548$178,187,361
DelewareJune 2018$117,892,225$13,742,416
MississippiAugust 2018$249,899,835$25,624,070
West VirginiaSeptember 2018$104,386,584$10,440,192
PennsylvaniaNovember 2018$125,627,832$12,589,960
Rhode IslandNovember 2018$77,108,456$1,848,495
Total New States$3,313,282,480$242,432,495
NevadaJune 2018$4,578,688,905$227,423,699

Putting that into perspective, Nevada, the Mecca of sports betting, collected $4,578,688,905 in total handle over the same length of time. New Jersey’s total handle alone since June is $2,638,367,548 and climbing.

With the addition of New Mexico, the sixth state to introduce sports betting, more than $7.9 billion in has been wagered across the country. Of that, $3 billion has come from new markets, according to research from the American Gaming Association (AGA).

“I think (sports betting) did just about as expected in terms of the number of states that have been able to get up and start taking bets,” said Kevin Braig, a gaming attorney with Shumaker, Loop & Kendrick in Columbus, Ohio.

“It may have even exceeded expectations in terms of the quantity of debate that’s gone on in statehouses,” Braig said in an interview with PlayUSA.

To Braig’s point, the debate over sports betting legalization has swept across the country like a contagious fever. There are currently 152 sports betting bills across 38 different states being considered.

Even conservative states like Arkansas and Tennessee have managed to pass sports betting bills. Montana, Indianaand Iowa passed their bills this month, all within days of each other. Not to mention Virginia, which has zero gaming within its borders, is actively entertaining the idea.

A look down the sports betting road

Gaming experts have predicted that by the time the 2019 NFL season rolls around, as many as 15 states could have legal, regulated sports betting.

“The fast-tracking to get the bills started and passed has been extraordinary — that doesn’t happen often,” Braig said.

But if states want to continue lining political coffers with tax dollars, lawmakers must continuously monitor the gaming landscape as it evolves to accommodate sports betting.

“Obviously, (a) good policy will translate into more revenue back to the states,” said Sara Slane, senior vice president of Public Affairs for the AGA.

In May alone, more than $55 million in state tax revenue was generated from sports betting, according to the AGA.

“You can start to see the difference between states that have more progressive models, like New Jersey, versus some of the other states, like Rhode Island and Mississippi,” Slane said.

To industry wizards, progressive sports betting models are the reason the early adopters have been able to secure a 7.4% hold on revenue, compared to Nevada’s 6.1% hold. But as Slane said, some models are limiting the overall potential of sports betting.

Looking at what makes money

Venturing 18 hours south of Atlantic City, you reach the coastal city of Biloxi, MS. It’s where more than a handful of casinos have introduced sports betting following the Supreme Court’s decision.

But unlike New Jersey, where mobile wagering runs wild like NFL Hall of Fame running back Thurman Thomas did with the 1990 Buffalo Bills — who averaged a league-best 130 yards rushing per game — political discourse has limited sports betting to brick-and-mortar facilities.

Research from the AGA shows $8 of every $10 is wagered online in New Jersey.

To be clear, Mississippi permits mobile wagering; however, it’s limited to the confines of the property, meaning once you step foot outside of the casino, you are not able to place any bets.

“Anyone who’s not mobile should go mobile, it has to be included,” Braig said.

Jay Kornegay, vice president of Race & Sportsbook Operations at Westgate Resorts in Las Vegas, agreed.

“The facts are out there right now. Those that have mobile wagering and remote signups are thriving,” Kornegay said. “Those that don’t offer or are limited are struggling.”

However, Braig followed up by saying sports betting will vary region by region.

“We’ve seen lots of variations, and I don’t think this is a dish that has to be subject to a single recipe,” Braig said.

A look at the South — the untapped sports betting market

One of the most active gaming enforcers has been Ronnie Jones, chairman of the Louisiana Gaming Control Board (LGCB). He has been speaking with lawmakers relentlessly about bringing sports betting to the Bayou State.

In an email, Jones said part of his argument to policymakers had been the notion that Louisiana residents are betting on sporting events every day via local bookies or the internet.

“Those activities are untaxed and residents betting illegally are left totally unprotected from unscrupulous providers,” Jones said. “If we really intend to reduce the illegal market share in a substantial way, mobile sports betting has to be an option.”

The addition of mobile wagering is not necessary for states to collect tax revenue–that will still happen regardless.

It appears that what industry experts are saying is, the addition of mobile and online wagering is necessary to stomp out the illegal market and make sure the product is running at maximum efficiency.

This idea of stomping out the illegal market is the battle cry of mobile sports betting advocates. It is heard in every statehouse entertaining the concept of sports betting and will not go away anytime soon.

“If you don’t have mobile or a reasonable tax rate you can’t invest in the product and get that customer from the illegal market over to the legal market,” Slane said.

Sports betting is only part of the puzzle

I don’t think there has been one legislative hearing where the phrase, “new stream of revenue” or “fill the budget gap” has not been uttered.

Many states have looked at sports betting in each of the above ways. However, lawmakers must be mindful that a retail sportsbook or flipping a mobile switch is only part of the economic puzzle.

“Gaming is part of a multiphased economic development plan,” Slane said. “That needs to be front and center when legislators are thinking about implementing sports betting.”

States including Illinois and New York currently are busy trying to appease all the relevant gaming interest occupying their states.

A few, but not all, include:

When you look at the overall economic structure of gaming, at least one of the above issues is always affected. Each state is different, but when you put the industry under a microscope, all are tied together.

Jones said he doesn’t anticipate Louisiana adopting a mobile component like in New Jersey. But, should the state mimic Mississippi, it would still put the state at a competitive advantage.

“Customers who come to properties to place sports bets are likely to spend money on other offerings — food and beverage, hotel rooms, other casino games would likely see increased revenue,” Jones said.

“That’s been the case in Mississippi, and they have parlayed sports betting into a huge draw for customers,” he said. “I think that positions Louisiana and Mississippi as regional destinations — we offer resort properties and resort experiences.”

Onward into year two of legal sports betting

New York sports betting is scheduled to make its debut in the summer; however, it will lack a mobile component. Illinois, on the other hand, is on pace to birth a monstrous gaming expansion bill similar to Pennsylvania.

If and when sports betting becomes a reality, both markets will be heavily monitored, scrutinized and dissected.

“Anytime you have a large population base; it’s going to put you at a competitive advantage,” Slane said.

That applies to Chicago, which has 2.716 million residents alone. While the city has longed for its own casino, the odds of it coming to fruition are very slim. With no casino, that means no retail sportsbook. But, if mobile wagering is implemented, that changes everything.

“Dozens of other states have been trying to navigate a path to take the next train out, some legislatures have turned down the opportunity, new states will come into play and some, like Louisiana, haven’t cast the final vote,” Jones said.

“I think it’s worth noting that the three states with the largest potential pools of bettors — Texas, California, and Florida — don’t seem to be near any consensus on the issue,” he said.

A common proverbial phrase is, patience is a virtue, which precisely is how Slane, of the AGA, views sports betting. 

“Things of this nature take time,” she said.

I suppose she’s right. Look at the Cleveland Browns, who have been patient for the better part of three decades. They, much like sports betting, are now, potentially, on the cusp of greatness.

Nicholaus Garcia

About

Nick comes from West Texas where he graduated from Texas Tech University with a degree in psychology. After a five-year stint in Chicago, where he wrote about local politics and graduated with a master’s degree in journalism from Columbia College Chicago, he moved to Washington, D.C. to write about issues related to gambling policy, sports betting and responsible gaming.

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