Sports betting is coming to Virginia in 2021, and with it a new industry that the state has never seen.
One of the big questions from the expansion to sports gambling in the state: How much money will it mean for Virginia?
Getting to an estimate at Virginia sports betting takes some educated guesses based on what we know from other markets.
Here is a rundown of what Virginia might see in its sports betting industry:
Virginia sports betting: How much money will be bet annually?
The top-line number is the one that gets headlines in the growing US sports betting industry. Some states are already seeing billions wagered on a monthly basis; tens of billions have been bet on sports in the US since the fall of the federal ban in 2018.
The “handle” — or total amount wagered in the state — should be the billions in Virginia. But how many billions?
It’s best expressed as a range or a “best case” number, because making an exact estimate is extremely difficult.
With that being the case, we are guessing that Virginia could reach more than $7 billion dollars in annual handle, with perhaps as low as $6 billion or less on the low range of outcomes. The $7 billion figure would not happen immediately but instead years down the road when Virginia online sports betting verges on maturity.
How do we get there?
Virginia sports betting vs. NJ sports betting
First we look to other states to see what they have done. However, keep in mind, no state has reached maturity for online sports betting, not even Nevada, which has grown with online betting slowly over the years. And the COVID-19 pandemic resulted in the shutdown of US sports for part of 2020, making it even more difficult to project what a mature and robust market would look like.
The best thing we can do is look to New Jersey, a state with legal sports betting and just slightly more population than Virginia’s 8.5 million people.
In 2019, New Jersey checked in with more than $4.5 billion in handle. And that is certainly not the high-water mark for New Jersey. The return of sports in August 2020 saw New Jersey set a new record for monthly handle at more than $650 million. Currently, New Jersey is currently tracking to have as much as $9 billion in annual handle upon market maturity.
There are reasons that Virginia will not do quite as well as New Jersey, however:
- NJ has online casinos; cross-sell from those games help drive sports betting handle.
- NJ has a very open market, with nearly two dozen operators; Virginia will likely be about half of that at best
- New Jersey has access to the New York City market, which has generated a huge amount of NJ’s sports wagering activity. New York has not yet legalized online sports betting. (Virginia does of course, have access to the Washington DC market. While there is a sports betting app in DC called Gambet, it is a monopoly and is underperforming.)
Another interesting case is Nevada, which annually checks in at about $5 billion in handle. But that’s a smaller state that will not have as robust of online sports betting market as Virginia will feature. Nevada has in-person registration, something which has stunted Nevada’s growth; Virginia allows remote registration.
All of that would put Virginia in between the two markets, in theory.
Virginia sports betting revenue
The handle number helps us get to how much revenue Virginia can expect to see. This is fairly easy to reverse engineer from handle.
The amount of money that sportsbook operators make from sports betting is traditionally a relatively small percentage of handle, between 5 and 8%. Taking the midpoint of 6.5% and applying it to $7 billion in handle, we come up with roughly $450 million in operator revenue.
This roughly falls in line with an estimate from the commonwealth of $462 million in revenue from sports betting with a robust online industry.
Virginia’s sports betting law also compares favorably to many other states. Reasonable fees and taxes, as well as what should be a competitive landscape, should help Virginia maximize the amount. Virginia could also attract bettors from other surrounding states, if they either don’t have legal sports betting or a competitive online betting industry.
Tax revenue from Virginia sports betting
This is fairly easy number to get to as well using the above estimates. Virginia taxes gross sports betting revenue at a rate of 15%. Taxing $450 million in operator revenue at that rate results in about $68 million in tax revenue.
Obviously, that number would vary based on how much handle there is, and what percentage of handle operators hold.
The bottom line for VA sports betting revenue
The above is just an estimate of what might happen in Virginia. What surrounding states do, how sports betting operators approach sports gambling and many other factors will play into how the Virginia industry.
No matter what, it will produce both new taxable revenue that Virginia was not receiving before it legalized sports gambling.