Could Online Sports Betting and Gambling Help Close State Budget Shortfalls?

Legal online sports betting and gambling can serve as a revenue generator for states and help offset budget shortfalls.

Legal online sports betting and gambling can serve as a revenue generator for states and help offset budget shortfalls. iStock.com/Hirurg

 

Connecting state and local government leaders

COMMENTARY | Taxes on online betting and gambling can help government leaders boost their budgets and create sustainable economic growth.

When Covid-19 shuttered businesses—including every commercial casino in the United States—it also reduced tax revenues and put a dent in the state budgets that depend on them.

State revenues for fiscal year 2020 sank 1.6%, and they’re projected to decline 4.4% in 2021. Legislators will be looking for ways to balance their budgets in the short term and create sustainable economic growth in the long term. Online sports betting and casino gaming can be valuable tools on both fronts, becoming major sources of tax revenue for federal, state and local governments.

However, for this to work, legislators must create a smart foundation for legal online sports betting and gambling. If legislators tax them too heavily, it will drive gamblers to untaxed illegal markets. State-run monopolies aren’t advisable either because they fail to capture market share and result in lower tax collections.

For the best results, states should create a legal online sports betting and gambling system built around competitive licensing. That was already a trend before the pandemic. Given the success seen by states that have adopted it, government leaders should expect many more to adopt this approach in the coming months and years.

States With Legal Online Sports Betting and Gambling

Almost two dozen states plus Washington, D.C., and Puerto Rico have adopted some form of sports betting. Three more states are in the process of implementing laws after November 2020 sports betting ballot initiatives received tremendous support. However, it’s important to distinguish between states that allow in-person sports betting versus states that permit online wagering.

Online casino gaming isn’t as ubiquitous in the United States as it is in other countries. However, 90% of sports betting revenue comes from online sources, meaning states like Mississippi and Arkansas that initially implemented measures that applied only to in-person venues missed out on significant revenue streams. But the success of the online market in Pennsylvania, New Jersey and now Michigan should make several more states reconsider implementing statewide mobile sports wagering so they don’t leave money on the table.

New Jersey, in particular, represents a model of what legal online sports betting and casino gaming can do for state fortunes with the right approach in place. Instead of tightly controlling online sports betting and gambling, the state applied a free-market framework that allowed multiple operators to set up shop and compete for business—and the plan worked.

New Jersey surpassed Nevada in 2020 for the amount of revenue collected through sports betting. Proceeds helped support property tax relief to alleviate pandemic-related budget struggles. The appeal of robust gambling options also helped New Jersey attract tourists from New York and revitalize racetracks throughout Northern New Jersey and casinos in Atlantic City. Not surprisingly, these results are appealing to other states.

Opponents of addressing revenue shortfalls through taxes on online sports betting and gambling believe that any expansion in gambling will lead to addiction. However, the data concludes the opposite. Problem gambling hasn’t gone up in states that allow online sports betting and gambling.      

Some industry insiders also worry that online sports betting and gambling will cut into casino and lottery revenues, but this hasn’t happened either. By all indications, the benefits of online gambling and sports betting have been real and substantial for all states that have embraced them. Consider this proof of concept for the states that have yet to embrace these practices.

A Win-Win for States

People tend to frame online sports betting and casino gaming as expansions of gambling. It’s more appropriate to think of them as gambling transfers—from illegal settings into legal ones. Underground channels for sports betting have existed for ages. And accessible offshore betting options have been around for about a decade.

People are already betting lots of money on sports; they’re just doing it in a setting that can’t be taxed or regulated. Legalizing online sports betting and gambling helps to shut this illegal market down and turn criminal profits into tax revenue that goes to the public good.

In that context, it’s easier to see why legal online sports betting is good for all, including nongamblers. States should run with that mindset and create a business-friendly environment with strict regulations to ensure customers are protected while allowing operators to market world-class entertainment products.

Online sports betting and gambling is just the start. As new technologies blur the lines between passive and interactive entertainment and skill and chance, the traditional frameworks between gambling and other forms of entertainment will also blur. States that embrace emerging entertainment technologies will be rewarded with tax revenues and business development opportunities. On the other hand, those that limit consumer choice will miss out on economic growth and could push consumers into dubious gray market alternatives.

Gambling revenues have already helped state budgets as more states embraced casino gaming. Now, they’re poised to transform again and on an even greater scale as legal online sports betting and gambling change the face of the market as we know it. The timing couldn’t be better: States need a plan for pandemic recovery just as online sports betting and casino gaming becomes legal, viable and extremely in demand.

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.