Sports Betting Makes Sense While Online Gambling Makes Dollars

Written By Martin Derbyshire on August 17, 2018

Sports betting has become the shiny new toy for lawmakers across the land — and they just can’t seem to put it down. However, revenue numbers coming out of New Jersey continue to show that online gambling is actually the lucrative tax revenue source most truly desire.

Put simply, sports betting makes headlines, while online gambling makes money.

US states have been lining up to pass sports betting legislation since the Supreme Court gave them that right in May. However, revenue numbers for the first six weeks in the state that fought the legal battle to launch sports betting clearly show it isn’t worth as much as anyone hoped.

State lawmakers are desperate to find sources of tax revenue to help balance the budget. They get sold on sports betting based on the idea the state can get a piece of the estimated $150 billion wagered annually (according to the American Gaming Association.)

They can’t tax handle

Unfortunately, they soon find out they can’t tax handle. So, while Americans may very well bet upwards of $150 billion on sports this year, the piece that sportsbooks keep in revenue and the tax revenue generated ends up significantly smaller.

Numbers released by the New Jersey Division of Gaming Enforcement this week showed two significant things. The first is that NJ sportsbooks have taken in more than $57 million in bets since launch in mid-June. The second is that the operations earned just $7.3 million of that in revenue.

The state’s land-based sports betting revenue tax rate sits at 8.5 percent. Therefore, New Jersey’s piece of the pie has amounted to approximately $620,500 so far. It’s a number that isn’t going to make a significant dent in New Jersey’s $37.4 billion budget.

It’s true the state’s legal sports betting industry is just getting off the ground, and doing so in a traditionally dead time for sports. After all, the NFL and NBA seasons don’t get going until the fall. But, it may still be awhile until sports betting even approaches online casino.

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New Jersey online gambling sets records

The New Jersey online gambling industry set a new record in July, generating close to $26 million in revenue. There’s every reason to believe it will continue to post similar numbers going forward.

In fact, July represented the 17th straight month NJ online casino and poker sites generated $20 million in revenue.

The state’s tax rate on online gambling revenue amounts to about 17.5 percent. Therefore, New Jersey’s cut in July was close to $4.55 million.

If New Jersey sportsbooks — like the new online DraftKings Sportsbook — continue on the same pace they started on, it will take almost a year before they generate the kind of tax revenue online gambling did last month alone.

Online gambling for the win

In this day and age, widespread legal sports betting across the US still makes complete sense. It just doesn’t make the kind of dollars online gambling can.

So, the next time a politician stands up in a state legislature and claims sports betting is the magic pill that can help cure what ails the state’s budget, let’s hope another comes forward with a better idea. Preferably, an idea that can be backed up with significant numbers and not just flashy headlines meant to appeal to this country’s undying love of all things sports.

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Martin Derbyshire

Martin Derbyshire has more than ten years of experience reporting on the poker, online gambling, and land-based casino industries for a variety of publications including Bluff Magazine, PokerNews, and PokerListings. He has traveled extensively, attending tournaments and interviewing major players in the gambling world.

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