Regulated Online Casinos Generate Far More Taxes Than Daily Fantasy

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[toc]The daily fantastic sports the industry has a chance to generate revenue for any state that:

  • Passed a law regulating the DFS;
  • Is large enough to have a significant player base;
  • And has fees and tax rates that force DraftKings and FanDuel pay more than a nominal amount.

But states still shouldn’t rely on DFS to pay the bills, now or anytime in the near future. In particular, if Illinois lawmakers are banking on DFS alone to raise large sums of money to help balance the budget, they may want to think again.

We know exactly how much money DFS generates in New York

The other day we reported on a white paper that estimates what regulated markets for DFS and online gambling would generate in Illinois. The state is considering a bill that went through the State Senate which would regulate and tax both DFS and online gambling. There is also the possibility that DFS will evolve separately from iGaming.

The white paper is based on estimates and projections, but it is also based on hard data:

Thanks to new laws and regulations in New York City, we know exactly how much revenue sites generate and how much the state collects in tax revenue. DraftKings and FanDuel donate 15% of their gross in-state revenues to the government, plus $ 50,000.

For the five busiest months of the year (September to January, around the daily fantasy football season), NY collected $ 2.8 million in taxes, the lion’s share of DraftKings and FanDuel. He could expect to roughly double that figure in the remaining seven months of the fiscal year.

When comparing the opportunity for DFS in Illinois, keep the following points in mind:

  • There are fewer people in Illinois (about 13 million) compared to NY (about 20 million). This means that there are simply more DFS drives in the latter.
  • The effective tax rate for the entire DFS universe is slightly lower in Illinois than in New York, based on a tiered system. (DraftKings and FanDuel seem likely to pay the same 15 percent rate).
  • The prospect of DraftKings and FanDuel merge Would also likely reduce short-term tax returns, as a combined company would not simply result in the two companies’ income being added together.

New Jersey Online Game vs. DFS

Thanks to several years of regulated online gambling in New Jersey, we also have a good idea of ​​the reaction of the new regulated markets.

A mature market in New Jersey is generating $ 20 million in revenue every month for the past three months. This resulted in $ 100 million in tax revenue direction the state coffers. NJ (nine million people), of course, is a smaller state in terms of population than Illinois.

We can also almost do an apple-to-apple comparison on gross revenue and tax revenue in New York for DFS and New Jersey for iGaming, thanks to data from the respective gaming regulators in those states. Here is the overall picture for the five known months of NY DFS revenue versus NJ iGaming. (Also keep in mind that New Jersey is about half the size of New York.)

And here are the tax receipts for the same period. New Jersey iGaming is taxed at a slightly higher rate of 17.5 percent, 15% of which goes to the general fund. Here is the income of both at the rate of 15%:

NJ NY Tax

Any month of NJ iGaming generates almost as much as DFS over that period.

The Bottom Line: While DFS does generate revenue, it is paltry compared to what online gambling and poker can do. And that’s not to mention the ancillary benefits land-based games get from iGaming.

What’s next for Illinois?

The latest from Illinois is that Governor Bruce Rauner convenes special session of the legislature which will span the last 10 days of June.

It will happen to take care of the state budget; State lawmakers have already spent more than two years without agreeing on a spending and revenue plan for the state.

The online gambling and DFS bill is one of the many moving parts of the legislature, and the House is not even guaranteed to take action.

But lawmakers need to know exactly what the DFS and iGaming industries can do for their state, if they are relying on either for significant revenue.

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