Sports Betting Not Huge Boon for State Tax Revenue: Board Chair

Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...

By Brenna Goth

States have an important detail to consider when working to legalize sports betting: what tax rate to use.

The U.S. Supreme Court’s May ruling in Murphy v. NCAA opens the door for states to legalize sports betting as a potential revenue raiser. The decision overturned a federal law mostly prohibiting gambling on single sports games.

But tax rates that are too high could drive consumers to the black market, said Brian Cohen, director of ally development at the American Gaming Association in Washington. Cohen spoke at the National Conference of State Legislatures’ Task Force on State and Local Taxation in Incline Village, Nev., June 28.

Those tax rates can impact states, consumers, and public safety, Cohen said.

“You want to have a reasonable tax rate,” he said.

Limited Revenue

Sports betting may not be a huge boon for state governments, said A.G. Burnett, a recent chairman of the Nevada Gaming Control Board. In Nevada, the state taxes the “rake,” or the money the house makes.

That means tax revenue is a fraction of the total bet.

“There’s not a lot of money in sports betting,” Burnett said.

Limited revenue means “integrity fees” could strip states of money, said Indiana Attorney General Curtis Hill (R).

Sports leagues have lobbied for integrity fees on a percentage of all wagers placed. The leagues have, in part, argued that the fee protects the integrity of the game, and that teams should benefit from the revenue created by bets.

Integrity fees raise the overall tax rate, which could make it harder for operators, Cohen said.

To contact the reporter on this story: Brenna Goth in Incline Village, Nev., at bgoth@bloomberglaw.com

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

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