Sports betting is off to a strong start in Virginia. But, consumers may want to watch the ongoing impact of a Virginia tax hurdle. It emerged for the first time in July sports betting numbers.
Legal Virginia sports betting began a new budget year with the numbers on Thursday.
As usual, the state took home 15% of the profits for the month. It came with a catch, however:
Even though betting was down — from $295 million in June to $266 million in July — Virginia’s share of the profits went up.
- The state saw a 63% jump in sportsbook tax collections from June to July.
- In raw numbers, the state of Virginia kept about $3.1 million in July compared to about $1.87 million in June.
Why did Virginia tax more in a slower month?
Virginia changed its budget language for sportsbooks. And, the new budget year began in July.
The state uses adjusted gross revenue (AGR) to determine its share of Virginia sportsbook profits. Virginia Code and the Virginia Lottery define AGR as “total wagers minus total winnings and other authorized deductions.”
When lawmakers approved sports betting in 2020, bonuses and free-play incentives were approved deductions.
That isn’t the case anymore. It’s a shame because sportsbooks liked the business incentives. It brought diverse and legal companies to the state.
Beatriz Gonzalez of the Virginia Sports Betting Alliance said the end of the free-bet deduction was “snuck [into] the Virginia budget with no public debate or discussion.”
“The initial legislation was never heard in any committee,” she said. “However, this does come at the detriment of the current legal market since our members can’t compete with offshore operators who still offer promotions.”
Gonzalez suggests the short-term bump in Virginia tax dollars will create a long-term reduction in state revenue. In a statement shared with PlayVirginia she said:
“Operators won’t offer as many promos as they have in the past and the ultimate size of the legal market will be smaller than it otherwise would be. It’s disappointing that budget conferees decided to take a shortcut to slightly higher revenues rather than stay the course and realize exponentially more recurring tax revenue in the future for the commonwealth.”
Thirteen online sportsbooks and the retail sportsbook at Bristol Casino – Future Home of Hard Rock contributed to the Virginia tax numbers for July.
Eight sportsbooks reported “net positive” numbers for July.
What could boost revenue instead?
Under the new budget language, sportsbooks can only deduct bonuses and free bets in their first year of operation. Virginia Del. Mark Sickles was happy about that. He told the Virginia Mercury “it’s just turning out great.”
It might turn out great for the off-shore sportsbooks though. Off-shore companies don’t help the Virginia budget at all. As Gonzalez noted, off-shores still have tax-free sign-up offers and bonuses. They pull bettors away from the regulated market.
- Remove the cap on the number of legal sportsbooks in Virginia. The state only allows 12 online sportsbooks, plus some exceptions for sports venues and the new casinos under construction. As with anything, more legal choices mean more business for the state.
- Let’s also end the betting ban on Virginia sports teams. That just sends business out of state or to off-shore books as well.
Both options give Virginia ways to grow revenue instead of taking a bigger cut of the current pie.