Reuters: Online Gaming Attractive for State Governments in Need of Tax Revenue
States that have legal online gaming and mobile sports betting have reaped the financial tax benefits of such internet gambling during COVID-19. The pandemic could entice new states to authorize online betting platforms.
In Reuters’ latest “Breakingviews” column, Hong Kong-based economic columnist Katrina Hamlin says shutdowns of commercial land-based casinos resulted in steep tax revenue losses for governments. States with legal iGaming and internet sportsbooks have been able to offset some of the brick-and-mortar tax damage.
Like other home entertainment, digital sports betting had a captive audience when COVID-19 struck, and is on track to rise by around a fifth globally in 2020, Fitch Ratings estimated in November,” Hamlin reported. “There is scope for further growth. New habits may stick, and legal options could displace illegal ones.”
Currently, only four states have online casinos with slot machines and table games: New Jersey, Delaware, Pennsylvania, and West Virginia.
Thirteen states allow their regulated sportsbook to facilitate wagers online: New Jersey, Pennsylvania, Illinois, Tennessee, Indiana, West Virginia, Iowa, New Hampshire, Nevada, Oregon, Rhode Island, Montana, and Colorado.
Reuters’ “Breakingviews” series covers financial topics and economic stories from around the world.
With much of the country still under COVID-19 regulations, tax income continues to fall. Lawmakers are expected to seek new revenue streams, and online gaming is tailored perfectly for a pandemic.
“With typical tax rates on internet gambling in the mid-teens or higher and growth accelerating, it’s an opportunity to top up their coffers,” Hamlin added. “And while online casinos come with a stigma, a nation of football, basketball, and baseball fans may find sports betting more palatable.”
Since the US Supreme Court in 2018 struck down the federal ban that limited sports betting everywhere but Nevada, 24 states, plus DC, have passed sports betting laws.
But it’s become quite clear that for sports betting to provide states with meaningful taxes from sports betting, mobile operations are essential.
In New Jersey, the state that now takes in the most sports bets, 84 percent of the more than $4.5 billion in wagers placed last year were facilitated online. That rate increased in 2020 through November to 92 percent.
Wall Street has been bullish on online gaming and sports betting companies during COVID-19.
Penn National Gaming, which acquired a 36 percent stake in Barstool Sports just prior to the onset of the pandemic, has seen its stock soar from $26 at the beginning of the year, to closing at $88.27 today.
Flutter Entertainment, which has invested $4.2 billion in FanDuel, has seen its shares skyrocket from $62 in January, to a close at $104.73 this week.
There is also much excitement surrounding the forthcoming launch of the Golden Nugget Online Gaming stock. Landcadia investors approved of the merger with GNOG this week.
Tomorrow, Golden Nugget’s online gaming arm will begin trading on the Nasdaq under the ticker “GNOG.”
DraftKings stock has also blossomed during the pandemic. Its shares were trading at $10.68 on January 2. Today, they’re at $48.11.
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