HARRISBURG — Gamblers placed almost $1.5 billion in wagers and generated $30 million in revenue for the state in the first full year of legalized sports gambling.
In December alone, gamblers wagered more than $342 million on sports bets in Pennsylvania, according to the Gaming Control Board.
The key reason for the Pennsylvania’s year-end momentum is its growing roster of online sportsbooks, which combined to produce almost 87 percent of the state’s total December handle — the amount wagered by gamblers, said Dustin Gouker, an analyst for PlayPennsylvania.com, a website tracking the gambling industry.
“That last two months of 2019 began to show us the real potential of the Pennsylvania market,” Gouker said. “Now that the online market is maturing, it is entirely possible that 2020 could bring in $4 billion or more in online and retail bets."
Pennsylvania will finish 2019 a distant third in total handle among all legal sports betting jurisdictions. New Jersey, the country’s No. 2, attracted $4.6 billion in bets in 2019. But Pennsylvania’s haul in state taxes was more comparable to New Jersey, which generated revenue of $36.5 million. Nevada is still the top state for sports wagering revenue.
“Pennsylvania is beginning to succeed where it wanted to most: making sports betting a significant revenue driver for the state,” Gouker said. “Its tax rate is significantly higher than every other state, which has slowed the industry’s growth. But Pennsylvania is the most populous state to fully legalize sports betting, and that has proven to be too enticing for operators to ignore.”
The Department of Revenue projected that sports wagering would generate $35.5 million in 2019-20, said Jeffrey Johnson, a spokesman for the department. The state fiscal year runs from July 1 to June 30, rather than by the calendar year.
Sports wagering provided almost $21 million in state tax in the first six months of this fiscal year, he said.
The tax revenue from sports wagering, while still significantly more than the state had been getting earlier in the year, actually dropped in December, compared to November, as gamblers took home more in winnings, leaving casinos with less profit for the state to tax, Gaming Control Board data shows.
December’s bets produced $17.5 million in revenue — down from November’s $20.6 million win. The state’s take in tax was $3.9 million in December, double what the state got in sports wagering tax in August, but still less than the $5 million in tax generated by sports betting in November.
“Sports wagering winning and losing is going to be very volatile,” said Doug Harbach, a spokesman for the Gaming Control Board.
Gouker called the problem as a “double-edged sword” for states because when gamblers win more, there’s less casino revenue to tax. But if gamblers don’t win often enough, there’s the chance they will become less likely to continue placing sports wagers.
Richard Auxier, a researcher who’s studied sports wagering for the Urban-Brookings Tax Policy Center in Washington, D.C., said when the public was first presented with the idea that sports wagering was going to be legalized, there was a lot of confusion about how much revenue would be generated.
Much of that confusion arose because people were fixated on how much people projected gamblers would wager.
“Some of the exuberance might be chalked up to a misunderstanding of what is being taxed," he said. "In a widely cited number, the pro-gambling American Sports Betting Coalition estimated Americans illegally wager $150 billion a year on sports. But even if that number were correct and all of America’s illegal betting became legal and taxed, it would not produce much tax revenue, because only a fraction of it would be taxed."
Thirteen states — including neighboring states, Delaware, New Jersey, New York and West Virginia — have sports betting. Close to half the states either have legal sports wagering or there is legislation moving to allow sports wagering, Auxier said.
“This isn’t just states having dreams of big revenue scores. They know better,” he said.
Where there’s resistance, it’s not primarily driven by other factors than concern the tax revenue from sports wagering hasn’t been as impressive as people expected, he said.
In some states, tribal communities have lobbied against state-run sports wagering.
An Associated Press investigation found tribes helped derail legalization efforts in Arizona, Minnesota, Texas and Washington, he said. Lobbying from tribal communities stopped sports betting legislation from being introduced in California, Florida and Oklahoma, he said.
John Finnerty reports from the Harrisburg Bureau for The Meadville Tribune and other Pennsylvania newspapers owned by CNHI. Email him at email@example.com and follow him on Twitter @cnhipa.