When a sportsbook opens its doors to online bettors in Virginia, they often rely on promotions and free bets to attract customers in the highly competitive business. Up until recently, operators could then deduct the value of the freebies from their revenue. As a result, the amount of taxes received by the state fell, according to Covers.
In May, as an example, nearly $10 million in bonuses and free-play incentives were reported by 14 licensed operators during the month, resulting in only $3.9 million in tax payments to the state.
But a recent change in budget legislation will have a major impact on taxes received. The new law limits deductions to the first 12 months. As a result, big-time operators like FanDuel, DraftKings, BetMGM, BetRivers, Caesars Sportsbook, WynnBET and Unibet can no longer deduct the promotional value.
The operators have relied less on promotions after the first year in business.
“It’ll be interesting to see how they change what they offer to the patrons as we move forward,” said Gina Smith, the Virginia Lottery’s deputy director of gaming compliance.
From January to the end of May this year, sports bettors wagered more than $2.1 billion online, Smith noted. FanDuel had a 41 percent share, while DraftKings 22.2 percent and BetMGM 19.7 percent.
Bookmakers spent $68 million in free bets and other promotions during the first five months, with BetMGM responsible for 37.1 percent of the promotions, FanDuel 27.6 percent and DraftKings 16.5 percent.
