Moody’s Investors Service predicted in a report last week that even under the most optimistic scenario, states can expect only a small revenue boost from legalized sports betting.
Delaware launched its full-blown sports betting program last week, and New Jersey is expected to finalize regulations and launch sports books within the coming weeks. Several other states have sports betting laws in place, and some 20 others have bills to legalize and regulate sports betting in the wake of the U.S. Supreme Court’s May 14 decision declaring the Professional and Amateur Sports Protection Act (PASPA) and its ban on sports betting to be unconstitutional.
Although estimates put the annual handle of illegal sports wagers at around $150 billion, the profit margin of legal sports books is only around 4 percent after winning bets are paid.
The 50 U.S. states could collect a combined $1.5 billion in taxes if they broadly legalized sports bets, including online wagers, and taxed at the 8 percent rate that New Jersey is setting, Moody’s predicted, based on data from an Oxford Economics report commissioned by the American Gaming Association.
That $1.5 billion is less than 0.2 percent of states’ combined operating funds for fiscal 2017, Moody’s said.
For New Jersey, which was the defendant in the Supreme Court case ultimately legalizing sports betting, while Moody’s predicted only a “minimal lift” in revenues from sports books in Atlantic City casinos, the addition of sports wagering is likely to bring new customers to the market.
“It should help increase tourism and boost the city’s casino-dominated economy,” Moody’s said. “At the state level, New Jersey will experience only a minor bump in tax revenue from the legal wagering relative to its budget.”
