Added tax revenue is often the selling point on gambling for many state legislators. Now, Wall Street state credit ratings firm Fitch Ratings says that state budget gains from sports betting will be modest, rather than robust.
Fitch points to the data from the first full month of NJ sports betting as proof. Though Garden State sportsbooks accepted $57 million in wagers during July 2018, the resulting tax on revenue only yielded $620,000 for the state budget.
Furthermore, the state budget for 2019 only forecasts sports betting tax revenue of $25 million. That figure is 11 percent of total gaming revenue and less than one percent of New Jersey’s state revenue projections.
The agency’s findings about New Jersey echoed the results from Delaware’s sports betting. In Delaware, the three sportsbooks collected $15 million in bets through July 2018, but that figure only resulted in $668,000 in tax revenue for the state.
A press release from Fitch urged observers to monitor the results in Mississippi, which now has active sports betting. The release also mentioned that more data will come soon from states such as Pennsylvania and Rhode Island.
A collateral benefit for state budgets
Despite the down note, the results were not all disappointing. Fitch went on to say that the secondary tax revenue from other purchasing related to sports betting would provide a more significant boost to state economies.
To put it bluntly, people have to eat, drink, and sleep somewhere when they visit an Atlantic City sportsbook. So, establishments that provide those kinds of services will likely see an uptick with the addition of sports betting.
Sports bettors don’t just gamble on sports either. Fitch mentioned that the data showed an overall surge in casino revenue in July 2018.
From a year-over-year perspective, Atlantic City casinos saw a 10 percent revenue increase with the debut of two new casinos, Ocean Resort and Hard Rock Atlantic City. This increase occurred even though the existing casinos in New Jersey fell victim to cannibalization from the two new properties.
In fact, the month showed a 13 percent increase in revenue with the inclusion of sports betting and online gaming. Compared to July 2017, New Jersey accrued 12.5 percent more gaming revenue.
NJ sports betting is still brand new
Obviously, state legislators want sports betting to be more than a modest contributor to the budget. However, this report may be a tad premature.
Quite frankly, we still don’t know how large the market in New Jersey will be. From the first month of operation to the second, NJ sports betting revenue grew by more than 240 percent.
Some experts believe New Jersey could potentially blow past the Nevada numbers — it’s just going to take some time.
The other thing to consider is the NJ sports betting market is in its infancy. Not every casino or racetrack has sports betting yet, though it sure feels that way with eight retail sportsbooks up and running. And online sports betting in the state has just three players: DraftKings Sportsbook, SugarHouse Sportsbook, and playMGM. More are expected to join the nascent industry soon.
The full extent of what a mature sports betting scene in New Jersey can produce is unknown, but for now, the Fitch Ratings statement is at least a note of warning that tax revenue won’t be the savior of the moment.