Online Betting Could Boost Pennsylvania Sports Wagering Into First Place

• Online betting could give Pennsylvania the biggest sports wagering market in the US.
• Even if the state doesn’t challenge Nevada for total handle, PA should generate more sports betting tax revenue.

HARRISBURG, Pa. – With online betting launching in the Keystone State, Pennsylvania could become the new mecca of sports betting in America.

Given the footprint and head start that both Nevada and New Jersey have in their respective marketplaces, that may seem like a tall order. But it’s not as far-fetched as you might think.

Pennsylvania is home to the second largest gambling market in the US after Nevada. Annually, Pennsylvania casinos haul in revenues of roughly $3.2 billion.

That amount is over $500 million more than the third-place state, New Jersey. Of course, it’s also far less than the $11.57 billion in revenue that Nevada sees each year.

Limited only to sports wagering, New Jersey’s current lead on Pennsylvania is significant.

Through March, New Jersey turned a sports betting handle of $1.07 billion and earned revenue of $63.1 million. In the same period, Pennsylvania saw $108 million in wagers and took in $10 million in revenue.

Of course, the playing field isn’t exactly level.

New Jersey has 11 brick-and-mortar sports wagering venues and online wagering already up and running. Pennsylvania has eight brick-and-mortar sportsbooks and no online betting in place.

In March, New Jersey’s 11 retail betting locations processed an average of $2.65 million in bets apiece. Pennsylvania’s eight locations saw an average handle of $5.56 million each.

While online gaming will cannibalize some of this in-person gaming traffic, it will also bring in a lot of new business. In New Jersey, online betting accounts for roughly 80 percent of all sportsbook action.

The idea that Pennsylvania sports wagering will pass New Jersey’s total handle once online betting rolls out is practically a sure thing.

When it comes to tax revenue, Pennsylvania seems squarely in the driver’s seat already.

Consider: Pennsylvania earned just 16 percent of the gaming revenue that New Jersey has this year. But the state’s earned nearly 50 percent as much tax revenue as New Jersey has.

Year-to-date, New Jersey sports betting has generated $7.7 million for the state. Pennsylvania sports betting has generated $3.6 million.

With the launch of online wagering, Pennsylvania will close that gap and take over the lead in a hurry.

How Does Pennsylvania’s Potential Compare To Nevada?

Compared to Nevada’s numbers, Pennsylvania has more of an uphill climb to be king of the mountain.

In 2018, Nevada sports wagering turned a record handle of $5 billion, earning $300 million in sportsbook revenue.

Pennsylvania’s biggest month so far has been March, where the state’s eight books turned a $44.5 million handle. Extrapolated over 12 months, that equates to $534 million.

Yes, that number doesn’t include online betting. But it seems unlikely that simply rolling out online wagering will increase the Pennsylvania handle enough to rival Nevada’s. Online betting is popular, but it will not increase wagering tenfold in Pennsylvania.

However, it’s less of a stretch that online Pennsylvania sportsbooks will generate more tax revenue than Nevada or New Jersey books.

That’s because Pennsylvania sportsbooks are taxed at 36 percent, the highest rate in the nation.

Compare that to Nevada’s 6.75 percent tax rate and New Jersey’s 13.0 percent tax rate (14.25 percent at racetrack-based online portals). Now, it’s easy to see how Pennsylvania will be top dog when it comes to wagering-related state income.

Thus, even if the above handle projection were the ceiling for Pennsylvania sports betting, the state would haul in $8.1 million in taxes. Nevada earned $20.25 million in tax revenue on legal sports betting in 2018.

Mix in online betting, and one should reasonably expect that Pennsylvania’s tax haul will eclipse Nevada’s. Online wagering is good for a threefold increase in business, at the very least.

Pennsylvania took a risk when it established the highest sports wagering tax rate in the world. But the strategy seems to be paying off, and it should propel the state into first place for tax generation, even if Nevada will always own the top handle.

News tags: Nevada | New Jersey | Pennsylvania | sports betting