Sports betting went live in Virginia over a year ago, and wagers are going strong and still building
Sports betting was legalized in Virginia just over a year ago, and it continues to be successful in the Commonwealth.
“I love advanced analytics, so my favorite sport is obviously baseball because it’s all just stats and analytics,” Mathew Sherman, a Harrisonburg sports bettor said.
Numbers got Mathew Sherman into the sports betting world, but he took it to another level by creating his own sports betting website.
“I started that as kind of like a source of content for people who didn’t want to do the hours of research every day and wanted to get like the shortcut of player projections and everything beforehand,” Sherman said.
In the first 11 days sports betting was live, Virginians wagered around $58 million.
Now, as of the end of February, The Virginia Lottery reports bettors have wagered a combined total of $4.1 billion, which generated more than $24 million in state taxes.
However, not all states have given the green light to sports betting just yet.
Logan Phelps, a sports bettor from Virginia, recently moved to South Carolina where he can no longer place bets.
“One thing that’s always kind of been interesting to me is like when we go back home, let’s say I’m driving, and he’s like ‘Oh hey let me see if I can place a bet’ or whatever ... goes on there it’s that quick of ‘Oh hey you’re back in the state go-ahead place your bet’,” Logan Phelps, sports bettor said.
With the evolution of sports betting across the United States, what you can bet on has evolved and grown as well.
“You can look at tennis, UFC ... I mean it pretty much covers everything nowadays which is crazy,” Phelps said.
Even down to the peculiar stats can be bet on.
“NBA there’s like a huge edge especially in fantasy sports because there’s like advanced stats like usage rate,” Sherman said.
Virginia sports betting revenue offset by tax breaks
Virginia has collected $26.7 million in tax revenue since launching legalized sports betting last year. However, the state may be leaving nearly that much on the table.
According to Virginia Lottery numbers reviewed by the Richmond Times-Dispatch, sports betting companies have offered $168.8 million in “bonuses and promotions” to customers since launching.
Those often take the form of free bets, offered to entice customers to join a particular betting service.
Because of the way Virginia law is structured, that promotional money is allowed to be deducted off of each company’s adjusted gross revenue before the tax rate is applied.
As a result, of the 12 companies currently taking sports bets in the state, only five have paid any taxes since launching.
Del. Mark Sickles, D-Fairfax, introduced legislation this year to eliminate the tax break, but it did not make it out of its committee, and was not voted on by the General Assembly.
According to a February study by the Tax Foundation, of the 30 states with legalized sports betting, eight currently offer companies the ability to write off promotional expenses.
The logic was that allowing promotional expenses would help build up the betting market faster. However, other states, including New York, have also launched to eye-popping numbers without allowing the write-off.
The Virginia Lottery, which is tasked with administering sports betting, releases updated numbers monthly.
In the most recent report, covering the time period through March 2022, companies have taken $4.58 billion in wagers, and paid out $4.19 billion in winnings on those bets.
That means the promotional write-offs negate 43.7% of the revenue Virginia’s government could tax.
The five companies that have paid taxes are Barstool Sports, BetMGM, DraftKings, FanDuel and Hard Rock digital.
Caesars, which has 9.7% of the Virginia betting market, was the largest company that has yet to make a tax payment.
A Lottery spokesperson noted that the organization has not been tasked with creating policy, only implementing what the General Assembly has arranged.
The most impactful outcome was in Colorado, which earmarked sports betting revenues to help with a water shortage crisis.
But in the first full year, gambling revenues fell short by about half of projections, while according to Bloomberg, the operators deducted 62% of their revenue, thanks in large part to promotional expenses.
The window has closed for Virginia to address the problem in this year’s General Assembly, but it is expected to take up the issue again in future years.