Low State Sports Betting Taxes Could Kill off Illegal Wagers

time icon
Low State Sports Betting Taxes Could Kill off Illegal Wagers

If the American Gaming Association’s 2019 $150 billion estimate for the illegal sports betting market across the United States was even close to accurate, clearly then, there’s a lot of room for growth in the legal online sports betting sector. Despite up to 20 states either already declaring sports betting legal or passing initial legislation to legalize sports wagering, many states of the union are still missing out primarily based on either the ignorance, or possible greed of the nation’s state politicians.

Clearly for some, online sports betting is the proverbial ‘goose that laid the golden egg’ in terms of raising state revenues for essential state government services, educations, welfare and Veteran’s protection programs. Some state politicians are trying to bite off more than they can chew, and not surprisingly, many states that have insisted on potential high state taxes on sports betting are the ones that have missed the legalization boat altogether.

Sorry anti-gambling states – the sports betting train has already left the station

With a possible recession on the nearby horizon, many states that may never have considered legal sports betting (traditional staunchly conservative anti-gambling state Hawaii is one such example) are considering raising funds with sports wagering to replace vital lost tax revenue.

However, the states face stiff competition from illegal local sportsbooks and illegal offshore online operators for a slice of that revenue pie. Consequently, it can be seen then that the states seeking to generate tax revenue from low-tax sports wagering have so far been more successful in driving illegal operators out of their respective markets.

Moreover, because some states acted quickly on the legalization of low sports betting tax rates, rather than hold out on sports betting legalization in the vain hope of passing higher sports wagering tax rates as some are doing, are missing out on tax revenue right now and over the long run.

The most successful online sports betting states are low tax

Gambling pioneer Nevada taxes at just 6.5 percent, while other online gaming states like New Jersey and West Virginia set it at 8 percent and 10 percent respective. It doesn’t take a math wizard to figure out that those jurisdiction’s state coffers are in a better condition than those of steadfast anti-gambling states like Utah or Hawaii.

The federal government currently does not have sufficient funds to sustain projected long-term programs such as Social Security, Medicare, and Medicaid, and collectively, state governments are not performing much better, with many states propping up the others.

However, the mistrust of betting – therefore online sports betting by association – is buried deep in the psyche and DNA of many US states — an antiquated attitude that went hand-in-hand with fears of corruption and mob violence in sport. However, it’s a new world now, with sports betting given back to the states to decide for themselves by the U.S. Supreme Court and the days of the increasingly stringent legislation that was adopted during the late 20th century is now a thing of the past.

Legal sportsbooks are subject to state taxes while illegal sites generally evade U.S. taxes altogether, giving them a competitive advantage. The illegal advantage will potentially survive if U.S. states tax legal sports betting at high rates.

What’s the Answer?

Simply put – Lower Tax Sports betting.

Illegal sportsbooks can set more attractive odds and lines than legal bookies, as the don’t pay taxes at all and can lower their odds and lines accordingly.

Keep those taxes low and the situation changes entirely.

The lower the odds and lines that legal operators can afford to offer to customers further increase the legal sites’ attractiveness in comparison to offshore illegal sites.

It’s a win-win for everyone. Legislators take note.