USA's Post-PASPA Sports Betting Revenue Crosses the $10 Billion Mark

It has taken 49 months for sports betting revenue in the US to hit a $10 billion milestone since the landmark Professional and Amateur Sports Protection Act (PASPA) ruling at the Supreme Court. The good news was announced on Tuesday after the latest sports betting revenue reports were officially released in Michigan and Pennsylvania.

Before the PASPA of 1992 was overturned in May 2018, you would have to drive or fly to Nevada to legally bet on sporting events in the United States. The PASPA law fundamentally banned sports betting nationwide, and only specific sports pools were permitted in Nevada.

Additionally, three other states – Oregon, Montana, and Delaware were allowed to conduct sports lottery draws. So, despite some exemptions, whatever was available wasn’t the fully-fledged wagering experience that sports fans would have liked to enjoy. Thankfully, following an intense legal battle, the US Supreme Court overturned the PASPA.

Just four years after the PASPA repeal, USA’s sports betting industry leaped from being practically non-existent to a flourishing sector with over 30 states now offering the activity legally.

Ray Lesniak, a now-retired New Jersey senator who had filed the suit against the PASPA, insisted he did so to safeguard consumers and provide tax revenue to states. Moreover, his vision also included a leeway to attract European betting companies into the US territories. After the PASPA verdict was read to pronounce his resounding victory, Lesniak said;

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“I made a good bet for New Jersey and for America.”

He was the first person to win a legal sports bet in New Jersey after picking France to win soccer in the World Cup, having placed a $50 wager and won $400.

Immediately after sports betting was legalized outside Nevada, sports fans were no longer restricted to just a few wagering options, such as predicting the outcome of a game before it began. The law in Nevada (and any other states) has since been amended to allow players the freedom of wagering on more interesting predictions, such as in-game betting and a host of other options. In addition, sportsbooks also offer multievent bets and promotions such as free bets or money back from gambling losses.

Five States Are the Drivers of the Stellar Sports Betting Performance

During the said 49-month period, US sportsbooks have processed $141 billion worth of wagers, making the $10 billion revenue about 7.1% of the total handle.

New Jersey leads the pack as the state that generated the largest handle ($28,564,955,152) and, therefore, revenue ($1,916,559,100) across the more than 30 states that offer sports betting. Following the Garden State, US jurisdictions whose sportsbooks garnered the most revenue from the total volume of wagers are as follows:

• Nevada received $1,401,664,000 from a $24,722,440,579 handle
• Pennsylvania garnered $1,133,552,892 from $15,206,154,279 worth of wagers
• Illinois brought in $946,620,091 from a handle of $15,206,154,279
• New York collected $648,779,713 after processing $8,952,027,604 in bets

Overall, the states collected $1.5 billion in tax revenue, suggesting a 15.1% effective tax rate. From the top-five list above, here’s the sum of money that went to individual state coffers:

• New York- $311,340,328
• Pennsylvania- $270,174,562 
• New Jersey- $242,021,240
• Illinois- $152,589,033 
• Nevada- $94,612,320

Looking at all the states with regulated sports betting of any kind – from retail to online and mobile, the total tax collected hit an impressive $1,507,462,061. What a win!

The Empire State Effect

New York launched its mobile and online betting market in January 2022, right before Super Bowl 56, to let residents wager via approved sports betting apps within state lines. DraftKings Sportsbook, BetRivers, FanDuel Sportsbook, and Caesars Sportsbook apps went live on the launch date, while BetMGM, PointsBet, BetRivers, and Bally Bet followed suit. The first 100 days of business racked up over $5 billion in total handle and registered a smashing $174 million in taxes within the same period.

If you take a closer look at the numbers, you’ll notice that 20.6% of the total sports betting revenue collected in the US came from New York. But how is this achievable for a state that is just six months old in online and mobile betting? Well, New York imposed a 51% tax rate, and the state does not allow sportsbooks to deduct promotion costs from their revenue.

However, there’s a clause in its state gaming laws gives room for a drop in the hefty tax rate when more operators join the market. No doubt, the US sports betting sector would not have seen the $10 billion revenue milestone this soon without the Empire State’s input.

More Room for Growth in the US Sports Betting Sector

Even with the great numbers recorded, most states in the country are yet to legalize sports betting; these include the three most populated jurisdictions in the country – California, Texas, and Florida. For example, if sports betting proposals are passed on the November ballot in California, the state could generate about $3 billion in revenue annually according to projections.

Florida has had a short-lived stint at online sports betting before it was closed when a federal judge deemed a state-tribal gaming compact illegal in November 2021. Nonetheless, all hope is not lost through House Bill 4308, two congressmen Rep. Luis Correa and rep. John Katko are appealing to deliver the Indian Gaming Regulatory Act into the 21st century. Additionally, Texas, a conservative state, is also looking to legalize sports betting.

Meanwhile, a few sportsbooks operators are looking closely to see if some states will amend their sports betting tax structures so that they can enjoy smooth market entry and streamline their customer retention strategies. For instance, while some states allow tax deductions on bonus promotions, others, like Colorado, and recently New York, deny operators the latitude to receive promotional deductions.