US Gambling Laws Changing

Publish: 04.07.2018
US Supreme Court

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Thanks to a Supreme Court ruling that has declared the 1992 Professional and Amateur Sports Protection Act (PASPA) unconstitutional, billions of dollars look set to be up for grabs in the gambling world.

New Jersey and Delaware are the first to have launched legal betting facilities. Rhode Island, West Virginia, and Mississippi are quickly adopting the new ruling and will open legal sports betting operations soon. Up for grabs is the illegal sports wagering in the US worth $150 billion.

Mississippi is expected to bring new regulations by the end of July while West Virginia’s operations will be running by the time the football season starts. 14 other states have also introduced sports gambling laws.

The American Gaming Association estimated bets worth over $4.7 billion during the Super Bowl in 2017, of which 97 percent ($4.5 billion) were illegal wagers. During the NCAA Basketball Tournament in March, bets crossed the $10 billion mark. The US is the second biggest untapped gambling market in the world behind China.

At a time like this, when states are quickly making new laws to attract gambling revenues, the Congress may be required to step in and create more uniformity in the laws. Even the NCAA has hinted their bias towards federal regulations over state regulations.

After the new regulations, Nevada’s stronghold on the US gambling industry could be gone. In 2017, the Nevada sportsbook had a 5.1 perfect profit margin on a betting industry worth $4.8 billion, according to the Nevada Gaming Control Board. The AGA expects sports gambling to evolve to an $8.5 billion industry.

However, all states will not try their hand into the online and mobile betting markets. Some states would be looking to regulate casinos. The taxes of the states can vary from 6.75 percent (in Nevada) to 51 percent (as proposed in Rhode Island). Pennsylvania is expected to keep the tax rate at 34 percent on winnings with a $10 million licensing fee.

However, high tax rates aren’t likely to help the states get their desired revenue. States like Kentucky have proposed a 3 percent excise tax on the total wager. Taxation between 6 and 15 percent is considered the ‘Goldilocks zone’ for sports gambling. Anything higher will be counterproductive for the states.

Mississippi and West Virginia are comparatively softer on legal sports wagering with a 12 percent and 10 percent tax respectively. New York is looking forward to an even more accommodative taxation plan with just 8.25 percent fee.

Although States are expected to make their own regulations, it remains to be seen if Federal legislation will be introduced.