In this column published in the Triangle Business Journal, Assistant Professor Bill Squadron writes about the economic potential of sports betting in North Carolina.
By Bill Squadron, assistant professor of sport management
North Carolina has, thus far, approved sports betting only in two Native American locations near the Tennessee border. But the legislature is considering a bill to permit online and mobile betting on sports events throughout North Carolina.
Where mobile betting is legal, the public response shows its interest and approval. When New York expanded its authorization from retail locations to online/mobile, the amount wagered jumped from $21 million to $1.7 billion in one month.
The sports betting industry is here to stay, and it is a powerful financial engine. It creates jobs, generates advertising and marketing, drives higher media ratings, and provides meaningful, incremental tax revenues to support state needs.
For business reasons, the state should not be left behind in this new part of the sports industry. States similar to North Carolina are seeing monthly sports betting approach $1 billion in handle, leading to roughly $750 million in annual, taxable revenue. And that is only in the first year of legalization – the number will surely grow.
The North Carolina State Senate passed legislation last year, SB 688, to legalize online and mobile sports betting, to be provided by up to 12 licensed bookmakers selected by the NC Lottery Commission. A House committee passed the bill in the fall, and additional House committees will consider it in the upcoming session.
The House should make changes to the bill before passage. Most importantly, the current bill’s tax rate of 8 percent imposed on bookmaker revenue needs to be double that number, which would make it more in line with most states. Virginia’s tax rate is 15 percent; Tennessee’s is 20 percent.
It bears noting that New York has imposed a tax rate of 51 percent, which will make it virtually impossible for betting operators to run a successful business in that state. Over time, that number must come down. But even with such an unreasonably high figure, it has not discouraged bookmakers from beginning to operate there – a testament to the long-term potential of the sports betting market.
The legislature should change the pending North Carolina bill to a 15 percent rate, and it should be imposed on gross revenues, rather than allowing the bookmaker to deduct its marketing costs as the current bill does. At a 15 percent rate, with a likely $10 billion in bets made annually, the tax receipts will exceed $100 million a year.
As SB 688 specifies, some of this money should be spent on addressing gambling addiction. The House should increase the portion dedicated to dealing with this problem.
Like any industry, sound policy and regulation are necessary to properly manage each industry’s issues. Gambling addiction already exists today in North Carolina. It will be far better to bring it into the light and help treat it.
Prohibiting sports betting will not stop it. The NCAA semifinal game between UNC and Duke attracted millions of dollars in bets from North Carolinians – either with friends, with illegal offshore-based bookmakers who pay no taxes, or across the border in Tennessee or Virginia where those states benefited from the tax revenue.
The Senate bill now before the House should be amended, passed and signed so that North Carolina’s economy can include this growing industry – and so the state’s sports fans can start to wager openly and legally.
Views expressed in this column are the authors’ own and not necessarily those of Elon University.