Sports Betting Could Debut in Indiana if Federal Ban Lifted

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By Alex Ebert

Two Indiana bills might bring sports gambling out of the shadows and into Indiana casinos if the U.S. Supreme Court lifts a federal prohibition against state-sanctioned sports betting.

If passed, S.B. 405 would make Indiana at least the fourth state that would permit betting on professional and amateur sports should the high court clear the way for states to regulate the industry. The bill would also impose a 9.25 percent “wagering tax” on the adjusted gross receipts of money earned from sports betting at casinos. Similar legislation in the House is also about to be introduced by Rep. Alan Morrison (R).

The U.S. Supreme Court is deciding a challenge to the federal ban this year and could free up state wagers by mid-summer. The justices heard oral arguments in early December in Christie v. NCAA—New Jersey’s attempt to repeal part of its state ban on sports betting in an effort to revive the struggling Atlantic City region—after a lower court ruled that the partial repeal violated the federal Professional and Amateur Sports Protection Act of 1992.

The possibility of capturing money from sports betting has made similar bills popular across the U.S. At least six other states have bills or referendums that would give state gaming regulators control over the industry if the Supreme Court rules in favor of states’ authority.

The projected winnings to Indiana aren’t barn-burning. Estimates on Sen. Jon Ford’s (R) Senate bill forecast the state’s general fund could receive between $3.1 million to $18.8 million annually on the gross receipts tax and a one-time $22 million boost from casino applications to host sports-betting. Morrison’s bill would also impose a 1 percent “integrity fee” on all sports bets that would be given to the leagues.

Legal and Competitive?

Bringing sports betting into state casinos from overseas online books is something both the legislators and casinos support. But casinos warn that too high taxes or fees on the industry would make it difficult for casinos to draw players away from illegal internet options.

The American Gaming Association, which represents casinos, came out against Morrison’s 1 percent integrity fee on the total amount wagered, saying the fee would squeeze profits and make sports betting untenable for casinos to the point they wouldn’t be able to compete with the odds offered by overseas illegal books.

“It’s unsustainable, and it would fuel the black market,” Sara Slane, American Gaming Association senior vice president for public affairs, told Bloomberg Tax Jan. 10. “The amount wagered is before winners are paid, also before taxes are paid. Assuming there’s a 5 percent hold, that’s 20 percent off the top of revenue.”

But Morrison defended the legislation, saying it could change before passage.

“There’s been a lot of positive talk about the legislation that I’ve put out there because we’re taking some of those necessary steps to put Indiana out front,” he told Bloomberg Tax Jan. 10. “Very seldom are you going to put out a bill—especially on gaming and alcohol—that everyone is going to agree on.”

Amateur Sports

Unlike other proposals, the bills would allow for betting on college sports. Although, Morrison’s bill would have a carve-out for non-revenue-generating college sports.

The National Collegiate Athletic Association declined to comment. However, on its website, the Indiana-based NCAA said it “opposes all forms of legal and illegal sports wagering, which has the potential to undermine the integrity of sports contests and jeopardizes the welfare of student-athletes and the intercollegiate athletics community.”

But leaving amateur sports out entirely isn’t a realistic option, Morrison said.

“We can’t carve out amateur sports and expect to have a successful legal sports wagering industry in this state,” he said. “Whether you’re talking about March Madness or the Alabama-Georgia game, if we do not include amateur sports in it, we’re not going to attract the customer we need to.”

To contact the reporter on this story: Alex Ebert in Columbus, Ohio at aebert@bloomberglaw.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bloombergtax.com

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