North Carolina this week became the 30th state with legal online wagering, and it appears NC sports betting is poised to beat even optimistic projections over time.
Eight licensed NC sports betting apps are serving up props and parlays to customers from Blowing Rock to Bald Head Island, and everywhere in-between.
Legislative researchers forecast about $65 million in tax revenue from the first year of regulated operations, the statutory 18% cut of an estimated $360 million in gross revenue. With operator hold now approaching 10% nationally, reaching that threshold would require about $3.6 billion in total wagers.
We think those targets are too conservative. The Tar Heel State has a long list of assets working in its favor, making us more bullish than most on its financial prospects for sports betting. LSR anticipates first-year volume closer to $7 billion for North Carolina, putting it comfortably inside the top 10 on the US sports betting revenue leaderboard.
Policy is always the most important indicator of sports betting potential, and North Carolinians have already gotten a bit lucky in that regard. Years of fiddling with the framework gave lawmakers plenty of time to make a mess of it all, but they avoided any big blunders as they eventually united around a sound piece of legislation.
The interplay between college sports and gambling was a key point of contention and one of the reasons it took so long for the General Assembly to come together. Provisions around college sports betting have been a thorny issue across the whole map; in fact, with more than half of all legalized states implementing restrictions on the teams or types of wagers available.
North Carolina does not have any such restrictions. College sports betting survived the long legislative process, including most notably the freedom to wager on in-state teams and players. That allowance is especially relevant right now, with March Madness betting acting as a major high point on the seasonal calendar.
Although professional sports remain far more important to annual betting totals, college sports figure to represent a larger slice of the pie for North Carolina than for most other states. Excluding Duke and Carolina from the local betting marketplace would be like banning Cheerwine sales at the Piggly Wiggly.
The sports betting law in North Carolina does not allow operators to deduct promotional credits from their tax obligation, a perk available to them in a number of other states.
It seems that local policymakers might have been monitoring these markets while they worked on their own bill. States with such promotional allowances largely populate the bottom half of the tax charts, including Kansas and Michigan with effective rates below 6% and Arizona and Wyoming just above it. Tennessee alone generated more sports betting tax revenue in 2023 than all four of those states combined.
With the national average rate hovering north of 19%, it is no surprise that officials in some of these states are revisiting the way they drafted their tax provisions. From a policy standpoint, creating competition in the marketplace should provide enough motivation for operators to maximize their value to customers without needing the extra tax incentive on top.
North Carolina is right on script so far, with thousands of dollars in signup bonuses available from operators this week.
Sports betting often ties the local interest in sports, so it is worth sizing up what North Carolina has to work with in that regard. The list is strong.
Three of the four major professional sports are covered, with the Charlotte Hornets (NBA), Carolina Panthers (NFL) and Carolina Hurricanes (NHL) all calling the state home. These teams will drive the majority of the local betting interest, with Charlotte FC (MLS) and the NC Courage (NWSL) helping to firm up the soccer column.
College sports are even more popular than their professional counterparts in some parts of the state. North Carolina is home to 18 college programs that compete in major NCAA D-I sports, the fourth most in the country behind California (25), Texas (23), and New York (22.)
If we had to pick one thing that stands out about North Carolina, it would be the pulled pork. If we had to pick a second, it would be the arguably unrivaled passion for local college sports.
There are a few other states that could be considered “college sports states.” College football is king in parts of the South, for example, and some states in the Midwest have a long tradition of success in college basketball.
Anyone who has spent time on Tobacco Road knows that North Carolina is a college basketball state. Even with pro sports mostly a few hours away in Charlotte, the Raleigh-Durham-Chapel Hill area should be a regional hotbed for sports betting.
It is not all about basketball anymore, either. College football seems to be growing in popularity in North Carolina too, as some of the local teams emerge as contenders on the national stage.
Golf is another area where North Carolina has a real chance to stand out from the pack.
The PGA Tour makes two regular trips to the state every year, once to Quail Hollow in Charlotte and once to Sedgefield Country Club in Greensboro. Both courses are authorized to offer sports betting, as is the Tour itself. This year is extra special too, with the US Open bringing major tournament golf back to Pinehurst for the first time since 2014.
Even when the pros are not in town, golf is a fundamental part of everyday life for residents and visitors of the Sandhills. This small geographical area, about the size of Rhode Island, boasts seven of the country’s top 100 public courses as ranked by Golf Digest. It is no exaggeration to say that golfers travel from all over the world just to play some of these courses, or just to watch other people play them.
It is also worth factoring in the Blue Ridge Mountains as a regional draw for active visitors during the fall and winter months. North Carolina has some of the southernmost leaf-peeping and skiing destinations on the eastern seaboard, and that extra inbound traffic during the peak sports season should help solidify the floor for NC sports betting revenue.
It would be unwise to overlook NASCAR betting in North Carolina. Stock car racing might not be a part of the national conversation, but it is practically a second religion in the state that invented it around 100 years ago.
With NASCAR Media Group and several race teams headquartered in Charlotte, the series logs thousands of laps every year around the Charlotte Motor Speedway and the newly renovated North Wilkesboro Speedway. NASCAR and both tracks are also licensed to offer betting, and all are major contributors to the sports ecosystem in the state.
None of this is to say that North Carolina’s launch will spawn a NASCAR betting boom. It is still a niche, relatively fractional market for sportsbooks that operate at a national scale. But the local interest in racing is uniquely large enough to move the needle on the revenue report and perhaps even justify some additional development in motorsports betting as a product.
An aggressive first-year forecast for North Carolina also reflects some of the early success among the most recent group of launches in states like Massachusetts and Ohio.
Ohio is a particularly interesting case, with its first month of legal betting still representing its biggest month to date. The Ohio sports betting market exploded onto the scene with $1.07 billion in wagers in January 2023, good enough to claim the second spot on the podium behind New York. Almost 30% of that volume stemmed from promotional credits awarded to newly registered customers.
While the market is still thriving in year two, Ohio has seemingly settled into sixth place without another billion-dollar month since that first one. It makes for a decent comparison, sitting two spots higher than North Carolina on the population table with about 1.35 million additional residents.
These opening months in are therefore interesting to monitor while at the same time being a dirty lens with which to assess the long-term prospects for the market. Early returns aside, though, a fine framework in North Carolina and its collection of relevant assets have it in position to be a significant player in the US sports betting industry from this point forward.
https://www.legalsportsreport.com/170966/why-nc-sports-betting-will-exceed-expectations/