The association’s consultants predicted, for example, that Virginia could expect to collect an extra $57 million a year in tax revenue if it legalized mobile sports betting and applied a 15 percent tax rate. That is what Virginia did, but in the most recent 12 months of betting, the state collected only $38 million.
Other states with large shortfalls included Connecticut, Michigan, West Virginia and Wyoming. Overall, in the 14 jurisdictions that allow mobile sports betting and that have tax rates in the range anticipated by the gambling association, tax revenues over the last 12 months have been nearly $150 million below the $560 million the group predicted, The Times found.
The association defended its estimates. It noted that it had at times cited lower estimates for the size of the illegal gambling market. And the group argued that it was too soon to tell how much would be bet or how much states would collect in taxes in the future and that as the market matured, tax revenues would rise. The association also said that some states’ restrictions on betting on college sports resulted in lower-than-expected revenue.
But one other reason for the shortfall, the group conceded, was that some states granted the gambling industry’s request for a generous tax exemption.
To lure customers into gambling, companies routinely dangle “free bets” and other promotions sometimes totaling thousands of dollars. Bettors can use those credits to make wagers without putting their own money on the line.
At least seven states, as well as Washington, D.C., agreed to let the companies fully deduct this promotional spending from their taxable income. Several other states allowed partial deductions.
In Colorado, Michigan and Pennsylvania this year, the free-bet giveaways were so generous during February — the month of the Super Bowl — that the promotional spending exceeded many platforms’ revenues, resulting in them facing, at most, minuscule tax bills that month, according to SportsHandle.