A new study highlights six areas that should be considered by stakeholders before they advocate for sports betting and online gaming in Puerto Rico.
The study, titled “Sports Betting and Online Gambling Market Assessment,” was commissioned by the Puerto Rico Hotel & Tourism Association (PRHTA) and conducted by Global Market Advisors (GMA). It notes that the local economy, legislation, regulations, geo-fencing, payment processing, data feeds and consumer protections need to be looked into to create a successful wagering market.
Puerto Rico Governor Ricardo Rosselló announced recently that he is introducing legislation to authorize sports event betting and online bets, at locations allowed by a Gambling Commission, which would be established if the bill is approved, such as casinos, race tracks, lodging establishments and former cockfighting venues, which were recently banned by the U.S. Farm Bill.
According to a report in Caribbean Business, the government commissioned two studies to be carried out on the revenue that could be generated if a 6 percent tax is placed on bets made in person and an 11 percent tax is levied on online bets. The Treasury would also receive funds from operating licenses and taxes on prizes and plays.
The GMA study estimates that land-based-only sports betting will generate $5.4 million during the first stabilized year of operations. Under the second scenario, also land-based, GMA assumed that “patrons could place bets in-person as well as via mobile through proprietary casino operated applications, after physically registering within a casino, providing proof of identification, and funding the account within the casino,” some $7.4 million in revenue could be generated by 2022.
“The variation in revenue between scenarios is largely due to the market’s ability to compete with illegal gaming offerings,” the study reads. “In Scenario 1, a land-based sports betting offering does not allow for the operators to provide a product that is accessible and convenient for market participants; instead, patrons will likely continue to utilize other illegal gaming options for a majority of their play, as illegal options are available via mobile and online platforms.”
The study also found that, overall, the market is expected to generate $23.4 million in online gaming revenue, and that some $4.2 million could come from tourists placing bets online.
GMA Managing Partner Steven Gallaway told Caribbean Business that the $44 million to $66 million the government said could be generated annually is a figure that could not be realistically achieved.
“It’s not possible,” Gallaway said. “There is no situation I can see where you have sports betting in Puerto Rico that could generate such amount. Projections of up to $66 million from sports betting revenue just do not add up. These figures are more than a quarter of the New Jersey market, an area which feeds off of the one of the wealthiest and most densely populated corridors of the country, encompassing New York, New Jersey and Pennsylvania. This compares to Puerto Rico, an island of only 3.4 million and a medium household income one-third of the U.S.”
Brendan Bussmann, also a GMA partner and director of Government Affairs, estimate the Puerto Rico sports betting revenue potential to range from $5.4 million to $14.9 million, depending on how the market is crafted.
“Those estimates are based on using the existing regulatory structure, licensees and including mobile to add convenience to the consumer in a strictly regulated environment,” Bussmann told Caribbean Business. “Sports betting is a high-volume, low-margin business, which means you have to have a reasonable tax rate for it to work. This is illustrated by seeing the success rates with sports betting in New Jersey and Nevada, states with comparatively fair rates, in comparison to Pennsylvania and Rhode Island, states with onerous tax rates.”
