In this column, published in the Triangle Business Journal, Assistant Professor Bill Squadron writes about the economic potential of sports betting in North Carolina.
By Bill Squadron, Assistant Professor of Sports Management
North Carolina has only allowed sports betting in two Native American locations near the Tennessee border. But lawmakers are considering a bill to allow online and mobile betting on sporting events across North Carolina.
Where mobile betting is legal, the public response shows interest and approval. As New York expanded its retail store authorization to online/mobile, stakes increased from $21 million to $1.7 billion in one month.
The sports betting industry is here to stay and it is a powerful financial engine. It creates jobs, generates advertising and marketing, drives higher media ratings, and generates meaningful, incremental tax revenues to support government needs.
For business reasons, the state should not be left behind in this new part of the sports industry. States like North Carolina see $1 billion in monthly sports betting, resulting in about $750 million in annual taxable income. And that’s only in the first year of legalization—the number is sure to increase.
The North Carolina State Senate last year passed a law, SB 688, legalizing online and mobile sports betting offered by up to 12 licensed bookmakers selected by the NC Lottery Commission. A House committee passed the law in the fall, and other House committees will consider it at the upcoming session.
The House should make changes to the bill before passage. Most importantly, the current bill’s 8 percent tax rate levied on bookmaker earnings must be twice that, which would bring it more in line with most states. Virginia’s tax rate is 15 percent; Tennessee is at 20 percent.
It should be noted that New York has adopted a 51 percent tax rate, making it virtually impossible for bookmakers to run a successful business in this state. Over time, this number must decrease. But even such an unreasonably high number hasn’t stopped bookmakers from operating there – a testament to the long-term potential of the sports betting market.
The legislature should amend the pending North Carolina law to a rate of 15 percent and it should be levied on gross receipts rather than allowing the bookmaker to deduct its marketing expenses as the current law does. With a tax rate of 15 percent and a projected $10 billion in bets per year, tax revenues will exceed $100 million per year.
As SB 688 states, some of this money should be spent on combating gambling addiction. The house should increase the proportion dedicated to addressing this issue.
As with any industry, solid policies and regulations are required to properly address the issues of any industry. Gambling addiction already exists in North Carolina today. Bringing it to light and helping to treat it will be much better.
Banning sports betting won’t stop it. The NCAA semifinal game between UNC and Duke raised millions of dollars in bets from North Carolinians — either with friends, with illegal offshore bookmakers who don’t pay taxes, or across the border in Tennessee or Virginia, where those states benefited from the tax revenues.
The Senate bill, now before the House of Representatives, should be amended, passed and signed so that North Carolina’s economy can accommodate this growing industry – and so the state’s sports fans can begin betting openly and legally.
The views expressed in this column are the authors’ own and not necessarily those of Elon University.