Legal Betting to Bring Billions for Pro Sports Leagues: Report

The 2018 Major League Baseball World Series starts Oct. 23, and in five states you can bet on it.

And because of those legal bets, MLB and the three other major sports leagues—the National Football League, National Basketball Association, and National Hockey League—stand to gain billions in additional revenue, according to a new study from the American Gaming Association (AGA) and the Nielsen Co.

This is the first MLB championship series since the U.S. Supreme Court’s May ruling in Murphy v. NCAA, which repealed the federal Professional and Amateur Sports Protection Act of 1992. That law had prohibited states from “authorizing” gambling related to professional and amateur sports leagues.

“The NBA and MLB stand to gain $1.7 billion from sports betting, and, collectively, the four major sports leagues could stand to gain as much as $4.23 billion in additional revenue annually,” Sara Slane, senior vice president of public affairs at the AGA, told Bloomberg Tax.

Slane said the projections will continue to grow.

“We can expect these figures to continue to rise, especially as in-game betting becomes available,” Slane said. “And we are about a year away from in-game betting.”

Richard Auxier, a research associate at the Urban-Brookings Tax Policy Center, told Bloomberg Tax that he couldn’t gauge whether the projected billions were feasible, but said that most of any additional revenue would come through the NFL.

“Nevada reported that football accounted for 59 percent of its sports betting in 2017, basketball was a distant second at 32 percent, and no other individual sports really registered,” he said.

Auxier said he considers himself a huge fan of baseball, a game that revolves around data and percentages, but that football will continue to be the big player in sports betting revenue.

“You cannot look up a football game without seeing the spread,” he said.

State Revenue Streams

Since the Murphy ruling, Delaware, New Jersey, Mississippi, and West Virginia have legalized sports betting and begun taking bets, opening new revenue streams in the process. These states are already starting to see millions in tax revenue.

New Jersey, the driving force behind sports betting legalization, has taken in $4.22 million in tax revenue from sports betting.

The Garden State began taking bets June 14, and through the month of September, bettors placed more than $336 million in wagers. More than $126 million of that total came from online betting. Revenue after paying out the winners equates to $15.7 million, and at a 13.5 percent established tax rate, the state took in $2.12 million in tax revenue, according to the state’s lottery.

The remaining $210 million is from in-person betting, which equates to $24.8 million in total revenue, and at an 8.5 percent established tax rate on in-person betting, the state took in $2.1 million in tax revenue.

Delaware, Mississippi, and West Virginia have already collected more than $4 million in tax revenue.

Revenue in Delaware more than quadrupled from August to September, mostly because of the start of the NFL season, which kicked off Sept. 6. Delaware alone has taken in $2.6 million in tax revenue.

New York, Pennsylvania, and Rhode Island have legalized sports betting, but haven’t yet started taking bets.

Buzz on The Hill

There’s been growing attention surrounding sports betting in the nation’s capital, too.

On Sept. 27, the House Judiciary Subcommittee on Crime, Terrorism, Homeland Security, and Investigations held a hearing devoted to sports betting. During the hearing, an NFL official and two lawmakers agreed that Congress should create a federal sports betting framework.

On Aug. 29, Senate Minority Leader Charles E. Schumer (D-N.Y.) proposed a “desperately needed” federal sports betting framework, a move that state tax policy experts say could hurt state sovereignty and tax revenue pursuits.

During an Aug. 24 update on the Senate floor, Sen. Orrin G. Hatch (R-Utah) said progress is being made, and he will be releasing a legislative proposal “in the coming weeks.” There is currently a 0.25 percent federal excise tax on all betting handles.