The Massachusetts sports betting market could handle $5.7 billion in bets annually when the market reaches maturity, according to PlayMA projections. Based on 2023 projections, that would make Massachusetts the eighth-biggest sports betting market in the US at full maturity.
Retail sports betting is already live, and online sportsbooks will launch on March 10.
Nine sportsbooks will launch mobile apps in 2023. They are expected to generate over 87% of the Massachusetts handle. That sounds like an overwhelming amount of money from online sportsbooks. But this is small compared to the role online betting plays in other sports betting markets.
In New York, 99% of sports betting handle comes from online sports betting. There are no retail casinos in the southern part of the state, where New York City is located. Even if there were, it’d be more convenient for many in the city to bet online.
Massachusetts’ three casinos are comparatively accessible. One is near Boston, and the other two lie on state borders. Retail sports betting handle will never eclipse online handle, but it can be a relevant portion of a state’s total handle.
Massachusetts sports betting handle scenarios
The most pessimistic scenario for MA sports betting tax revenue is also among the most optimistic for handle — which is the total monetary amount of sports wagers.
Promotional bonus bets may boost handle by 2-4%. In PlayMA’s projections, that’s about a $100 million difference in handle. (It’s easy to glaze over the difference between $5.6 billion and $5.7 billion.) Based on the national average sportsbook hold of 8%, MA sportsbook gross revenue would be almost $7.9 million higher when you include the bonus bets.
Based on calculations from other states, Massachusetts’ write-off for the projected $457.8 million in gross revenue would be just more than $160 million. After that, the state has $297 million in taxable revenue. Without promotional write-offs, though, Massachusetts could have been just under $450 million in taxable revenue by the end of a mature year.
So, the difference between $56 million and $87 million in annual sports betting tax revenue will hinge on Massachusetts’ approach to promotional write-offs.
“We believe there is a very real chance Massachusetts reaches $87 million in sports betting revenue — which is significantly more than the $60 million state lawmakers projected,” said Eric Ramsey, market analyst for PlayMA. “Of course, there’s still a big domino to fall: How will the Massachusetts Gaming Commission handle promotional write-offs?”
PlayMA based its handle and revenue projections on patterns observed in other states. Every state’s sports betting industry follows the same seasonality. Handle drops after college basketball NCAA Tournament betting and doesn’t pick back up until the next NFL season.
The promotional deduction for the write-off scenario is 40% of gross revenue and about 3% of total handle. This is consistent with other states. It’s why Colorado, for example, is phasing its sportsbook write-offs out, beginning at capping write-offs at 2.5% of total handle.
However, Massachusetts also has unique attributes. Like Colorado, Ohio and Pennsylvania, Massachusetts has a large city that also happens to be a hotbed for professional sports — Boston. Massachusetts only has a few retail sportsbooks but will have far more online options, including big-name brands such as BetMGM Massachusetts and DraftKings Massachusetts.
Taxes on Massachusetts online sports betting
PlayMA’s most optimistic scenario projects that Massachusetts sports betting could generate up to $87.2 million in annual tax revenue at maturity. However, that ceiling depends on how regulators approach the thorny issue of promotional write-offs.
The low estimation for sports betting tax revenue without promotional write-offs is about $62 million. This is a hair higher than the Massachusetts legislature’s projection of $60 million.
With promotional write-offs, the high estimation is $56.6 million, which is 2/3 of the high estimation without tax write-offs. The lowest estimation is $45.8 million.
These estimate changes are why other states have resisted their approaches to promotional write-offs. In the summer of 2022, Colorado passed a bill that reduced the amount of credits sportsbooks could write off. Ohio prohibited sportsbooks from deducting promotional credits at launch.
Meanwhile, the Massachusetts Gaming Commission is split on whether it has the authority to impose limits on promotional write-offs. This part of the state’s sports betting policy remains uncertain and, in turn, leaves state tax levels uncertain.
Massachusetts sports betting market compared to other states
Massachusetts is small compared with surrounding markets. In New York, FanDuel generated just under $5.5 billion in handle in 10 months by itself. Pennsylvania’s sports betting market is a little bigger than Massachusetts’ is expected to be. In 2022, Pennsylvania generated just over $7.2 billion in handle.
New York, New Jersey, Illinois, Pennsylvania and Nevada all had handles exceeding $5.7 billion in 2022. And Ohio, which just launched sports betting in January, is projected to reach as much as $12 billion in 2023. Ohio reported $1.1 billion in total sports wagers in January.
According to our 2023 projections, Massachusetts will drive $4.2 billion in sports bets in 2023. That’s 12th-most in the US.
At full maturity, Massachusetts sports betting will be closer to the size of Colorado’s sports betting market. Colorado sportsbooks generated almost $5.2 billion in handle in 2022, which Massachusetts could reach in a year or two.
How soon will Massachusetts reach full maturity?
The monthly handle required to meet these milestones can ramp up quickly. Arizona took two months to reach normal seasonal levels. New York reached it in a week.
Massachusetts isn’t going to be the country’s largest sports betting market, but passionate Boston bettors will no longer cross the state’s borders to bet on their beloved teams. Sports betting will also increase funding for problem gambling services in a state that’s already among the highest spenders in the US in that area.
The comparably modest size of Massachusetts’ sports betting industry shouldn’t dilute its importance for the sliver of the state budget its tax dollars will fund. The $87 million is a drop in the ocean of Massachusetts’ $52.7 billion budget.
However, the $7.8 million that would go to the state’s roughly $17 million problem gambling budget would generously expand the available treatments and research funds.