Massachusetts sports betting tax revenue claims have varied wildly over the past few months. Governor Baker’s budget proposals have previously estimated that betting on professional sports will generate $35 million in tax revenue per year. Senate estimates for combined college and professional betting total $60 million.
Now that the college sports betting question has been solved in the final bill, Massachusetts sports betting tax revenue could reach and even surpass that $60 million figure. For comparison, early low estimates pegged first-year tax revenue at $13 million. Early high estimates of New Jersey’s sports betting tax revenue potential pegged the figure at $84 million annually.
In New Jersey’s first year of online sports betting, sportsbooks paid just under $28 million in taxes. Three years later in 2021, New Jersey sportsbooks paid $100 million in taxes. Early estimates underestimated sports betting demand and tax revenue.
Even with four years of legal sports betting in the United States, Massachusetts sports betting tax revenue could follow a similar growth pattern. $60 million may be the high estimate now. But high popularity and demand could push that revenue estimate higher when the market reaches maturity.
The Biggest Variable: College Sports Betting
One of the major conflicts between Massachusetts House and Senate representatives was whether to allow bets on college sports. On one hand, college sports draw many viewers during key seasons. College football and college basketball are large markets that sportsbooks can make available to bettors.
However, responsible gambling concerns weigh on the college sports betting debate. In other markets, lawmakers raise concerns about college athletes placing sports wagers. That can lead to point-shaving scandals.
For example, Arizona State basketball player Stevin Smith partnered with a bookie to fix NCAA basketball games. Smith would deliberately score fewer points to keep certain point spreads from paying out. In return, his bookie paid him $20,000 per game.
While that was only the beginning of the point-shaving scandal, it shows how easily college athletes can be swayed to corrupt their sports. In Smith’s case, he was in debt to his bookie. But many college athletes may be financially vulnerable and open to similar schemes.
The compelling cases for and against sports betting on college sports are why the Massachusetts sports betting bill took so long to pass. Senate President Karen Spilka initially opposed all college sports betting. House Speaker, Ron Mariano, considered including wagers on college sports a “dealbreaker.”
As Mass Live reports, the final bill allows Massachusetts residents to bet on Massachusetts college teams that are in tournaments with at least three other teams. So, Massachusetts residents can bet on March Madness, and legislators can keep sports wagers out of regular season college games.
That compromise has important tax revenue implications.
Massachusetts Sports Betting Tax Revenue Depended on Compromise
Massachusetts sports betting tax revenue estimates revolved around how many college markets would be available at sportsbooks. Between professional and college sports, lawmakers estimated sports betting could generate $60 million annually. Without college sports betting, that figure dropped to $35 million.
So, Massachusetts has set itself up to generate far more than $35 million from sports betting. It’ll be closer to the $60 million estimate.
The current limits on college sports betting on Massachusetts teams may not be consequential. Most college teams are outside of Massachusetts, and March Madness is one of the largest sports betting events of the year. Out-of-state events and March Madness could make up for whatever shortfall may come from not being to bet on certain Massachusetts college games.
After the 2022 Super Bowl, DraftKings found that over a quarter of its New Hampshire bets were from Massachusetts residents who had crossed state lines to bet online. Massachusetts sports betting could generate $20-30 million in its first year, then reach and even exceed $60 million three to five years later.
As sports betting has become increasingly integrated into mainstream sports, so too has sports betting activity. $60 million per year may seem like a high tax revenue target before a Massachusetts launch. But three to five years later, $60 million may be a quaint memory.