5/14 Forever: Pennsylvania, New Jersey and Illinois Setting Perfect Blueprints for Online Sports Betting Rollouts

When it comes to regulated sports betting across the U.S., some states are doing it better than others. And for those that have yet to fully institute or legalize the practice, they can begin mapping their industry off of the ones that have found economic success in terms of both business revenue and tax revenue.

Of the 30 states (plus Washington D.C.) where wagering on sports is now legal, there are three that are doing it better than the rest: Pennsylvania, New Jersey and Illinois.

Dimers.com contributor Michael Krumholtz takes a look at how each one of these early adopters has found pathways to a lucrative industry in their own ways, and what lessons other states can take from them.

 

Pennsylvania

Pennsylvania was one of the first states to enact laws to legalize sports betting and it has paid big dividends for the Keystone State. 

Of all the states on this list, Pennsylvania has the highest tax rate at a steep 36 percent. While that may be a bit painful for operators, it’s proven to be a big boon for state revenue.

Ever since the first sportsbooks were up and running in 2019, Pennsylvania has raked in more than $269 million in taxes from the industry. 

But even with that high tax rate, sportsbooks are still flourishing. Sports betting operators in the state have taken in a combined $1.1 billion in revenue since legalized gambling came into play. And all the high-profile names, like FanDuel, DraftKings, Barstool and BetMGM have online options in the state.

For those states who want to see a big return on their investment in tax dollars, Pennsylvania’s blueprint of allowing many operators — rather than limiting it to just local ones — while keeping a high tax rate can be a good blueprint to follow.

New Jersey

Though most other states won’t have the built-in casino infrastructure that New Jersey has with Atlantic City, there are still good regulatory and business practices that the Garden State has proved can be successful.

New Jersey sportsbooks took in nearly $11 billion in bets last year and made $815 million in revenue, nearly doubling the revenue in Nevada. As the lead state in the court case that overturned PASPA, New Jersey has taken the reins on sports betting and leads all states by a wide margin in revenue for operators.

And even though it has a much lower tax rate than Pennsylvania at just 8.5 percent, this high volume of bets wagered has led to higher income from taxes for the state at more than $30 million.

Much of this success comes from the fact that there are 16 licensed operators who can take sports bets in the state. This gives bettors a ton of options to shop around for their favorite odds, making them more likely to place bets in-state rather than bet with an offshore company or in other states like New York, which has the highest tax rate of them all at a whopping 51%.

Illinois

The Land of Lincoln posted a massive $1.8 billion in betting handle in 2020, the first year that sports betting was legal. Illinois provides a great framework for others who have yet to legalize as they were a late adopter compared to the other states on this list.

There was some existing infrastructure in place which has helped with retail betting, as the state has more than a dozen casinos that sportsbooks can now operate out of. And online books like BetRivers and DraftKings have found plenty of success in Illinois.

In terms of tax rate, they fall in between the two extremes of Pennsylvania and New Jersey at a standard 15 percent.

One thing that was arguably holding the state back was an in-person registration requirement, meaning first-time bettors couldn’t just pick up their smartphones and start placing bets without going into a brick-and-mortar sportsbook to sign up.

With that no longer the case as of March 5, 2022, it should lead to even higher revenue than the $36 million the state posted in 2021, and proves to other states that laws and requirements can be adapted on the fly if they’re holding back money for businesses and the state.

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