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All rights reserved worldwide. There are at least a dozen states that appear ready to enact new laws to introduce or expand legal intra-state wagering on sporting events this year, once the High Court decision is announced. In , the State Legislature of Delaware was considering reopening sports books in racinos, which the state was allowed to do, because it had been grandfathered-in under PASPA. I was retained as the legal consultant by the Delaware State Lottery, which runs all sports betting, to advise the state on what the tax rate should be on the new sports books.
I prepared a report and recommendations. I follow this with a quick analysis of the Indiana plan, which appears to be spreading across the country. This tax was so high that it was virtually impossible for even the best sports handicappers to win consistently. Licensed sports books were limited to Nevada. Individuals who worked in the industry during this time reported widespread tax evasion to get around this high tax.
Sports books make their profit from the statistical advantage they have over their patrons. If the sports book succeeds in having the same amount of money wagered on both sides of a match, it is guaranteed to make a profit. Sports books allow patrons to make a wide variety of bets. Looking at a single sports book: This is equivalent to a tax on gross gaming revenue of Nevada also has a sliding scale of state gaming taxes, with the top tax rate quickly reaching 6. This was low enough to allow a few entrepreneurs to think about expanding the small turf clubs into true sports betting parlors.
In the Nevada Legislature passed enabling legislation so that casinos could have sports books. But the tax rate was so high that few casinos were willing to devote any of their valuable floor space to a form of gambling that generated so little to the bottom line. In , Congress lowered the federal excise tax on legal sports wagers to 0. This is equivalent to a tax on gross gaming revenue of 6. Sports books not only became large and numerous in Nevada, they were viewed as profit centers and entertainment enticements for commercial casinos.
By all of the small independent sports books were closed, replaced by multi-million dollar casino sports books with dozens of giant video screens and all the other services sports bettors could want, including easy access to other forms of gambling. Here is how the same analysis would work using the numbers proposed for Indiana, i.