Choose Your Battles Wisely
Choose Your Battles Wisely
Massachusetts rejected a proposed sports betting tax increase, but this is far from the final word on the subject in Massachusetts and beyond.
The Bulletin Board
NEWS: Massachusetts rejects proposal to increase the tax rate on sports betting operators, but don’t expect the discussion to end there.
BEYOND the HEADLINE: Did a newspaper just put the idea of a higher tax rate in the ear of the Pennsylvania legislature?
LEGISLATIVE UPDATES: Responsible gambling accountability bills in New Jersey; Rhode Island smoking ban shelved (for now).
NEWS: WSOP.com rebrands to WSOP Online as it merges player pools in Nevada, New Jersey, and Michigan.
BEYOND the HEADLINE: Could Pennsylvania or West Virginia be the next interstate online poker states?
AROUND the WATERCOOLER: Need someone to blame? Look in the mirror.
STRAY THOUGHTS: The right thing at the right time for the right reason.
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Massachusetts Senate Says No to Higher Tax Rate
The Massachusetts Senate quickly rejected a proposal to increase the state’s tax rate on sports betting operators from 20% to 51% — Yesterday’s newsletter will lead with a similar effort that has more legs in Illinois.
Massachusetts State Sen. John Keenan, who introduced the idea in a budget amendment, was on an island despite a 20-minute soliloquy about the evils of gambling.
However, there is growing momentum in legal sports betting states to bump the tax rate, and anyone who thinks Massachusetts’ rejection signals a lack of appetite isn’t paying attention or is selling something.
Previous STTP coverage of proposed sports betting tax rate increases
“Despite the respite in Mass, higher tax rates for OSB will be proposed in state after state after state.
“Not all of them will be quite as extreme as Mass. Many of them will have broad-based support. Many may be wrapped in a package of politically popular changes such as increased RG, marketing restrictions, consumer protections, etc.
“In most worlds, the blended tax rate for OSB across all current states will increase materially over the next three years.”
As Grove noted, the Massachusetts effort was an incredible overreach by an anti-gambling lawmaker who, dare I say, was looking for some press.
I don’t think many states are interested in considerable increases in their sports betting tax rates. Still, I won’t be surprised to see several low-tax states (10% and lower rates) consider increases to 15% to 20% and mid-range states (10% to 20%) look to squeeze a few percentage points more out of operators in the coming years.
As analyst Chris Lynch put it, taxes only go in one direction.
Further, tax increases come in many forms. Eliminating or reducing promo deductions, adding responsible gambling or local community obligations, or starting from a much higher point for online casinos (the next frontier).
If I’m an operator in a state with a tax rate at or below 10%, I would make contingency plans, as the tax rate could rise to 15% (and potentially more) within five years.
The industry can continue “crying poverty,” as former Gov. Andrew Cuomo advisor Rich Azzopardi told Legal Sports Report in April, but as I said about the cannibalization arguments, “The argument isn’t landing, and the industry needs to stop doubling and tripling down on it.”
“They said it would not be possible to do business in New York, and it would not work for them. And frankly, they had legislators bought and paid for by them that were parroting the issue,” Azzopardi said. “I cannot tell you how many stories the lobbyists planted and the press planted. We always said the tax rate was good, and it worked for the state. We were proven right at the end of the day.”
Beyond the Headline: Et Tu Pennsylvania
Penn Live is putting the bug in the Pennsylvania legislature’s ear that maybe it should consider increasing its sports betting tax rate:
“Could Pennsylvania lawmakers have an appetite for increasing revenue by spiking the taxation rate on the lucrative online sports wagering business?
“No one can say at this point, but legislators in surrounding states are certainly heading in that direction, taking advantage of record revenues derived by eager online sports gamblers.”
The idea seems far-fetched, considering Pennsylvania has one of the country’s highest sports betting tax rates at 36%. However, it also allows promotional credit deductions, which puts the effective tax rate under 25%.
If it wanted to get a little creative, Pennsylvania could increase its tax rate without increasing its tax rate. Instead, it could eliminate or cap promotional deductions. The main argument for promotional deductions is to raise awareness in newly legalized markets, which might fall flat in Pennsylvania, a market that has been live since 2019.
Legislative Updates: NJ RG and Accountability Bills; Rhode Island Smoking Ban Shelved
A good first step: New Jersey State Sen. John McKeon has introduced two bills, S3062 and S3063, aimed at punishing casinos for enticing self-excluded gamblers with promotions. The legislation follows a high-profile lawsuit filed by Sam Antar, who accused MGM of enticing him with bonus offers and ignoring obvious signs of problematic play. Antar’s attorney, Mathew Litt, told US Bets the bills were a nice first step, but preventing people from getting to the self-excluded point would be better. “In broad terms, it would be a limitation on incentives and communications that are calculated to get people to bet more frequently than they should.”
Rhode Island kicks the smoking can down the road: Efforts to prohibit smoking in New Jersey and Pennsylvania have been derailed, and now we can add a third state to that list: Rhode Island. A bill that would ban smoking at Bally’s two Twin River properties (Lincoln and Tiverton) was held for further study last week. Like the online cannibalization debate, contradictory evidence was presented by both sides.
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Interstate Online Poker Gets A Boost With WSOP Online
It’s official: WSOP.com merged its poker platforms in Nevada, New Jersey, and Michigan yesterday, creating the new WSOP Online poker network — Existing players in Nevada and New Jersey should go online to download the new client and complete the registration process to create an account on the new platform.
The new platform uses evoke’s (formerly 888) Poker 8 software, which features numerous upgrades, including:
four-table capabilities on mobile
multi-flight re-entry tournaments
in-app gift drops
Mystery Bounty tournaments
The launch coincides with the start of the 55th World Series of Poker, which begins on May 28. According to the press release, WSOP Online will host 30 online bracelet events between June 1 and July 21.
“The best is yet to come for WSOP Online tournaments, and we’re thrilled to bring Michigan players into the fold with Nevada and New Jersey, resulting in a better experience, more value, and the biggest prize pools of the year,” Danielle Barille, Vice President of Online Poker at Caesars Digital said in a press release.
Pokerfuse has been all over this story (and I recommend its latest reporting on the merger), picking up on hints that pointed to the launch. The outlet has been criticized for its investigative reporting on the possible merger, but to no one’s surprise, it was right all along.
Beyond the Headline: Will More States Approve Interstate Online Poker?
As Yoda told Obi-Wan Kenobi, “There is another.”
That other is Pennsylvania, which has numerous online poker sites, including WSOP.com, but has yet to authorize interstate online poker.
Pennsylvania’s reluctance is a source of frustration, but the good news is that more pressure is being put on state officials with the authority to sign an interstate agreement.
Pennsylvania Rep. George Dunbar introduced legislation in March that would require regulators to join the Multi-State Internet Gaming Agreement (MSIGA) within 30 days of the bill’s passage. The legislation hasn’t made any waves, but as Dunbar noted at the time, Pennsylvania Gov. Josh Shapiro can authorize interstate online poker, and, if nothing else, his bill puts the topic of interstate compacting on the governor’s radar.
Another potential candidate is West Virginia. In November 2023, West Virginia effectively authorized interstate online poker when it joined the Multi-State Internet Gaming Association (MSIGA). However, merging player pools with other states is difficult since West Virginia doesn’t have any active online poker operators, who put off launching due to the state’s small population (around 1.8 million).
Around the Watercooler
Social media conversations, rumors, and gossip.
When they conduct a post-mortem, the industry might need to take a good, hard look in the mirror.
As I recently tweeted, the chickens are coming home to roost:
In Illinois specifically, when your argument for low taxes is that you’re a low-margin industry with a 5% hold, and your current hold rates are pushing into double-digits, lawmakers might feel justified in asking for more money:
Stray Thoughts
Success comes from doing the right thing at the right time for the right reason. The last bit is the most important, as it’s possible to stumble into the first two and look like a genius.