Online Poker Takes A Back Seat To Sports Betting in 2018

February 16, 2018
Online Poker Takes A Back Seat To Sports Betting in 2018

States from New York to California have been lining up to pass sports betting legislation lately. In fact, up to 20 have passed or are considering bills that would legalize sports betting with one caveat.

The US Supreme Court needs to declare the federal law prohibiting sports betting pretty much everywhere outside of Nevada unconstitutional. Or, Congress must repeal it.

New Jersey is one of four states which have passed a bill legalizing online poker. It has also been leading the fight for legal and regulated sports betting inside its borders since 2011. It finally got the Supreme Court to hear its case in December of last year. A decision that will now have major implications on sports betting across the country thanks to all this new legislative activity is expected in June.

The sports betting bandwagon

The states eager to jump on the sports betting bandwagon have enjoyed the right to join New Jersey in legalizing online poker for quite some time now.

However, most have not. In fact, only Delaware, Nevada and New Jersey actually have legal and regulated online poker. Additionally, Delaware and Nevada have had some form of legal sports betting for decades now.

Pennsylvania is the fourth state that has seen fit to pass online poker legislation. It did so in October 2017. However, the licensing and regulation process still ongoing with the first online poker sites not expected to launch until later this year.

At this point, all this sports betting legislation is purely speculative. In the meantime, online poker legislation is generating real tax dollars for the states that have it.

So, why are so many states so eager to pass what amounts to anticipatory sports betting legislation, yet so few of them are interested in legalizing online poker? Isn’t a bird in the hand still worth two in the bush? Maybe not.

Big business means big tax bills

The truth is, online poker has not yet proved to be worth enough money to get lawmakers excited about it. Meanwhile, sports betting is big business and big business means big tax bills.

The Nevada Gaming Control Board claims a record $4.87 billion was bet on sports in the only state with full legal sports betting last year. Sportsbooks across Nevada turned that into $248.8 million in revenue, which was also a record.

Record handle and revenue means a record amount of taxes on sports betting as well. Even though Nevada has made some noise about having it repealed, the federal government took a 0.25 percent excise tax on that $4.87 billion in handle. That’s close to $12.175 million.

Nevada gaming taxes have a sliding scale with a top tax rate of 6.75 percent on gross gaming revenue. That had the state collecting 6.75 percent of the $248.8 million in revenue generated last year. That’s close to $16.8 million.

Considering Nevada sports books are earning approximately five percent of handle in gross revenue, the 0.25 percent federal excise tax works out to around 4.8 percent of gross revenue ($12.175 million in excise tax divided by $248.8 million in revenue). Essentially, this means Nevada sports books paid approximately 11.55 percent of gross gaming revenue in taxes. In 2017, that amounted to almost $29 million. That’s the figure that has lawmakers across the country licking their chops.

Just a drop in the bucket

In contrast, New Jersey’s online gambling operators generated a record $250 million in revenue in 2017. The state’s online poker market is the largest in the country, but it’s really only amounts to about 10 percent of total online gambling revenue. That works out to approximately $25 million in online poker revenue. The state taxes that revenue at a rate of 15 percent.

That’s around $3.75 million and just a drop in the bucket compared to the tax dollars sports betting is generating in Nevada. That’s the figure that has lawmakers across the country wondering if online poker is worth their time.

The American Gaming Association estimates sports betting is a $150 billion a year business. If that’s true, it’s no wonder state governments across the country have moved it up on the agenda.

It appears for now, online poker and the community that so badly wants the right to play, will have to continue to play the waiting game instead.

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