Virginia legalized sports betting in January of this year. Now, only five months later, the Virginia Lottery reports residents have placed over a billion dollars in bets. Moreover, the lottery’s latest sports betting report shows $236 million wagered just in April.
The number seems large, but estimates show the state is primed to take about $5 billion in sports bets every year. And it’s a reasonable estimate, considering that half of all adults in the US have placed at least one sports bet in their life.
For comparison, the Virginia Lottery brought in around $2.15 billion in revenue in 2020 for all activities it oversees. Sports betting will likely single-handedly exceed that number in 2021.
However, the revenue from sports betting is nowhere near that number since about 95% of sports bets end up as prize money back in the hands of gamblers. Still, the state expects to receive significant tax income from sports betting.
That said, it may be a while before that tax revenue starts rolling in. The state only collects tax on the companies’ adjusted gross revenue, so promotional spending and other tax deductions leave little for the state to tax.
Virginia has licensed 10 companies to offer sports betting in the state. The lottery announced that it was considering licensing five more in the following period.
So far, the top three earners have been DraftKings, FanDuel, and BetMGM, but only BetMGM ended up paying taxes in the first two months of operation. High promotional spending resulted in adjusted gross income insufficient to tax the other two.
As the market grows and stabilizes, experts predict that companies will reduce promotional efforts and generate higher incomes.
The Joint Legislative Audit and Review Commission of Virginia projected $55 million of annual income from tax for the state from sports betting activities.
Currently, only these companies are licensed to offer sports betting in Virginia:
- Penn Sports
- Caesars/William Hill
- Golden Nugget
With the way things are going, the prospect that these numbers will continue increasing in the future is high.