Pennsylvania And New Jersey Are About To Engage In A Sports Betting Border War

Posted on January 16, 2019 - Last Updated on July 15, 2019

With over $1 billion wagered and nearly $100 million in revenue since the first sports wager June 14, the budding sports betting industry in New Jersey is exceeding all expectations.

New Jersey’s success can be traced, in part, to forward-thinking policies the state adopted. Rather than restrictive policies, lawmakers and regulators have empowered operators.

First and foremost among those policies, the state didn’t waffle over online wagers.

Online and mobile wagers were up and running soon after its retail books went live. NJ sportsbook apps already account for three-quarters of the total amount wagered in the state.

But part of NJ sports betting’s success can also be traced to the lack of competition in the region.

New York and Philadelphia contribute to NJ sports betting

As a first mover — and an extreme first mover on the mobile front — NJ sports betting has been able to draw in customers from the border population of neighboring states.

Not only are New York City and Philadelphia residents visiting New Jersey casinos and racetracks to place bets, but they’re also making the 10-20 minute drive across the border, placing bets online and driving home.

According to the NY Post, 10 percent of DraftKings Sportsbook and FanDuel Sportsbook wagers in NJ come from New York residents, and plenty of analysts believe that number is much higher.

The out-of-state traffic is a boon for business now, but the Garden State’s sportsbooks better start looking over their shoulders.

Pennsylvania casinos are beginning to open retail sportsbooks, and the launch of mobile sports betting is just around the corner. There’s also the distinct possibility of legal sports betting coming to New York in 2019.

And in case it wasn’t clear, just because PA sports betting is active, it doesn’t mean you can use an NJ sports betting app in the Keystone State. The two states have two entirely different systems. Apps in one state won’t work in the other.

Bottom line: New Jersey won’t be the only game in town for much longer.

New Jersey sportsbooks will have to up their game

NY and PA sports betting will take a bite out of NJ sports betting revenue, but how big of a bite will depend on a number of factors. At least one will be working in New Jersey’s favor.

Tax rates give NJ an edge

New Jersey sportsbooks will have a significant advantage over Pennsylvania books thanks to the two states’ disparate tax rates and licensing fees.

A New Jersey sports betting license costs $100,000 and books are taxed at the following rates:

  • Five percent for land-based sports betting revenue.
  • 13 percent for online wagering run by casinos.
  • 25 percent for online wagering run by racetracks.

Pennsylvania’s $10 million licensing fee and a 34 percent tax rate. handicaps the state’s sportsbooks. That will likely translate into higher vig and far less money to spend on marketing in Pennsylvania.

Advantage New Jersey.

Product and brand

Product and brand will also play a major role when it comes to where and with whom people place wagers.

The evidence in New Jersey points to sports bettors and potential sports bettors gravitating toward trusted brands that resonate with them, provided they have a competitive product.

All the value and rewards in the world are meaningless if you don’t have a recognizable brand and a decent product.

New Jersey and Pennsylvania will share several land-based and online sportsbook brands, so this will probably be a wash. However, if Pennsylvania operators don’t invest and reinvest in their products because of the hefty licensing fees and tax rates, it could once again be advantage New Jersey.

Convenience

Convenience is the great equalizer.

If the choice is to bet from their living room, or get in the car and drive across the Pennsylvania-New Jersey border to pay a slightly smaller vig or use a slightly superior product, most people are going to bet from home.

With a larger population, 12 casinos spread out across the state and many right near the border (New Jersey’s casinos are tightly bunched in Atlantic City), Pennsylvania will have the convenience advantage over New Jersey.

Will a rising tide lift all boats?

The competition between New Jersey and Pennsylvania will be fierce. It will likely lead to New Jersey losing some of its out-of-state mobile customers, but that was inevitable.

It will be interesting to see how the New Jersey sportsbooks planned for this eventuality, and how they respond to it.

There’s a possibility that the competition between states is the proverbial rising tide that lifts all boats. But the smart money is on the cream rising to the top, with specific operators doing well in both states while others struggle.

Two groups will benefit from the sports betting border war:

  • The sports bettors living near the New Jersey-Pennsylvania border, who will be continuously wooed by operators in both states.
  • The Philadelphia television and radio markets, which will receive plenty of marketing dollars from operators in both states.
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Steve Ruddock

Steve covers nearly every angle of online poker in his job as a full-time freelance poker writer. His primary focus is the developing legal and legislative picture for regulated US online poker and gambling.

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