It’s really immaterial what the U.S. Supreme Court decides about legalizing sports betting this spring.
It’s clear that the Professional and Amateur Sports Protection Act (PASPA), passed in 1992, is a complete failure.
Rather than prohibit sports betting, it has driven it underground so billions of dollars have been wagered each year with organized crime.
That spawns such crimes as money laundering, racketeering, terrorism and even murder. So it’s only common sense that Congress needs to act, no matter what the Supreme Court decides.
Of course, “common sense” and “Congress” rarely go together, so you never know.
What is happening now, however, is the attention of states to legalized sports betting if the court decision is positive or Congress acts.
And that’s going to be a patchwork of laws that work and other laws that don’t. So let’s start with the most obvious problem: the business model of sports books.
Legislators are rarely businessmen, so don’t really understand the margins under which sports books operate.
Last year in Nevada, which is the only U.S. state with full-blown sports betting, the state’s sports books retained only 5 percent of the wagers—before rent, personnel and other costs.
Penalty Box for Leagues It’s really immaterial And that was a good year.
Nevada pays 0.25 percent of the handle to the federal government (something all U.S. sports books will have to do) and a 6.25 percent gaming tax on the win.
But in Pennsylvania, for example, the law taxes sports betting at the same rate—36 percent—as they do regular casino revenue.
That renders sports betting ineffective and profitless.
New Jersey will tax it at the current 9.25 percent that is applied to all.
Casino revenue, a reasonable figure that makes sports betting viable.
The thing that will really kill sports betting completely in any state will be the so-called “integrity fee”
Penalty Box for Leagues It’s really immaterial That is currently being demanded by the National Basketball Association and Major League Baseball.
They want 1 percent of the handle (that’s all the bets made!), which will translate into at least 20 percent of the profits of any sports books even before taxes are taken out.
Layer that onto a state with a high tax rate, and it effectivel kills any opportunity to make money on sports wagering.
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