The mobile sports industry has taken off in popularity since May of 2018 when the United States Supreme Court overturned a federal ban on the pastime that had stood for decades.
Of course, with an entirely novel industry like this, it’s difficult to predict exactly how things will shake out. It can take decades for economic trends to settle, meaning that we’re all playing with house money in a sense as we watch how the industry continues to boom. Here’s a crash course in how the mobile gaming industry has evolved during the past half-decade, including the biggest plot twists and updates to the booming pastime.
Tax Law
Like I said, it can take decades to figure out exactly how financial models play out in practice, and even then there’s still quite a bit of debate as to what works best. Tax law is one of the best examples of how this relates to the gambling industry because of the way that states continually try new things and play catch-up with one another.
Right now, there are two main economic models for sportsbook taxation. The first model requires heavy tax rates reaching as high as 36 percent in Pennsylvania and a whopping 51 percent in New York State. By skimming massive amounts of money off the till, these states are ensuring that they’re going to come out ahead no matter who wins a bet, but the solution still might not be perfect.
The other scenario, as you may have already figured out, plays out in the exact opposite fashion. For instance, the state of Ohio set forth a 10 percent gaming tax rate when they first opened for business, hoping that lower tax rates would encourage sportsbooks to set up shop in their state—and make it harder for black market betting sites to take hold because of the stiff level of competition they’d face from thriving mainstream sportsbooks.
Funnily enough, Ohio eventually decided that the benefits of high tax rates outweighed the risks, as they bumped their tax percentage up to 20 percent this past year. We’ve seen plenty of copycats within the gaming industry as states try out someone else’s novel idea for themselves, and it’ll be interesting to see if tax rates start to ratchet up nationwide as more governments follow Ohio’s examples
Sportsbook Promos
This is, from my perspective, the most fun thing about the booming industry. When you first make an account with a sportsbook’s betting sites, you’re likely to receive one of two promotional offers.
The first is a deposit match, often up to $500 or $1000, where the sportsbook gives you betting vouchers equivalent to the amount of money you first deposit. The second is a risk-free bet—again, often up to $500 or $1000—where, if your first bet ends up failing, you’ll get a second chance to make your money back with another wager.
These promotions are an absolute coup for the sportsbooks because they’re able to write off the money they end up giving back as business losses on their tax forms. If a bettor makes good on the second chance, bookies don’t have to pay as steep of a tax penalty, but if the bettor loses, the books are going to rake in cash.
As you might expect, Uncle Sam eventually got wise to this economic loophole, and most states are looking to abolish or severely cut back the ability for sportsbooks to use these promotions for tax purposes: much like with Ohio’s changing tax rate, we see a series of copycats as one state’s good idea gets used again and again.
Changing the World
If you were to go back and watch a recorded Super Bowl from six or seven years ago, it’s unlikely that you would see a single commercial.
These days, they’re almost impossible to miss, whether you’re driving around town and looking at billboards or if you’re sitting on the couch in front of your TV.
The success of the betting industry has permanently changed the way we consume sports media, even to the point where journalism outlets like ESPN are starting sportsbooks of their own.
As with tax rates and promotional betting offers, it wouldn’t be surprising to see this get drastically reduced in the next couple of years as states decide to crack down, but it’s fascinating to watch the high-speed dance between lawmakers and bookies as they each try to stay one step ahead of the other, finding ways to profit from their respective rampant successes.
With the way things have played out during the first six years of mobile betting, just imagine where we might be a decade or two from now.
