Virginia’s sports betting industry has kicked off on a robust note. However, individuals should remain attentive to the effects of a tax obstacle in the state. This hurdle came into the limelight when July’s sports betting figures were revealed.
On Thursday, the start of a new budget year in Virginia marked the commencement of legal sports betting in the state, bringing forth new figures.
As per usual, the state claimed 15% of the profits for the month. Nonetheless, there was a condition attached to it:
Despite a decrease in betting, with $295 million in June dropping to $266 million in July, Virginia saw an increase in its share of the profits.
Way up.
- In July, the state recorded a significant 63% increase in sportsbook tax collections compared to the previous month of June.
- In terms of absolute figures, the state of Virginia saved approximately $3.1 million in July, which is higher than the savings of approximately $1.87 million in June.
Why did Virginia tax more in a slower month?
The budget language for sportsbooks in Virginia was modified, coinciding with the commencement of the new budget year in July.
In order to calculate its portion of Virginia sportsbook earnings, the state relies on adjusted gross revenue (AGR). As per the Virginia Code and the Virginia Lottery, AGR is defined as the difference between total wagers and total winnings, after accounting for any authorized deductions.
Bonuses and free-play incentives were authorized deductions when sports betting was approved by lawmakers in 2020.
The situation has changed. It’s unfortunate because sportsbooks were fond of the business benefits it brought. It attracted a variety of legal companies to the state.
According to Beatriz Gonzalez from the Virginia Sports Betting Alliance, the elimination of the free-bet deduction was discreetly included in the Virginia budget without any public debate or discussion.
“The initial legislation,” she explained, “was disregarded by all committees. Unfortunately, this situation adversely affects the existing legal market as our members are unable to match the promotional offers provided by offshore operators.”
Gonzalez proposes that the immediate surge in tax dollars in Virginia will ultimately lead to a decrease in state revenue in the long run. In a statement provided to PlayVirginia, she expressed her viewpoint.
Operators will reduce the number of promotions they offer compared to previous years, resulting in a smaller legal market size. It is disheartening that the budget conferees chose to prioritize slightly higher immediate revenues instead of staying on track and generating significantly more recurring tax revenue for the commonwealth in the future.
The Virginia tax numbers for July were boosted by the participation of thirteen online sportsbooks and the retail sportsbook at Bristol Casino – Future Home of Hard Rock.
July saw a net positive numbers reported by eight sportsbooks.
What could boost revenue instead?
Virginia Delegate Mark Sickles expressed his satisfaction with the new budget provisions, which restrict sportsbooks to deducting only bonuses and free bets during their initial year of operation. He enthusiastically stated to the Virginia Mercury that the situation was “just turning out great.”
However, the off-shore sportsbooks could potentially benefit greatly from this situation. It is important to note that these off-shore companies do not contribute to the Virginia budget in any way. As Gonzalez pointed out, these off-shores still offer tax-free sign-up offers and bonuses, which entice bettors away from the regulated market.
Instead:
- Eliminate the restriction on the quantity of legal sportsbooks in Virginia. Presently, the state permits only 12 online sportsbooks, with limited exceptions for sports venues and upcoming casinos. Expanding the number of authorized options will inevitably result in increased economic activity for the state.
- We should also consider lifting the ban on betting for Virginia sports teams, as it only leads to the loss of business to other states or offshore bookmakers.
Both options offer Virginia opportunities to increase revenue without increasing its share of the existing pie.
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