Digital Wager Wire highlights the most significant events affecting the domestic and international sports betting and gaming industries each week throughout the year.
Kansas Considering Tax Hikes on Sportsbooks
The sports betting industry has swelled by 70% year-over-year as the Sunflower State reaped $17.4 million in taxes on sports betting revenue last year, but the launch of the sports betting industry in neighboring Missouri may see a large contingent of those customers vanish once the Show Me State launches mobile sports betting on December 1st.
That fact, coupled with Kansas’s low tax rate of 10%, coupled with an allowance on promotional deductions, has caused legislators to rethink the rate and perhaps eliminate those tax incentives sportsbooks enjoy for promotional wagers. Moreover, the nationwide shift to increasing tax rates in states that already impose much higher tax rates has only added fuel to the legislative fire.
Legislative Discussion on Sports Betting Taxes
A recent meeting of the Kansas Legislature’s Special Committee on Federal and State Affairs raised these topics, and it is likely the beginning of upcoming changes to the sports betting industry in the state. Some have even mentioned the possibility of dispensing with the 12 sports betting licenses, only half of which are active, and shifting to one company that would pay the state a higher tax rate for the exclusivity it would enjoy.
State Representative Francis Awerkamp is one legislator who believes the state is owed more revenue than it is currently receiving.
“If you take a look at the percentage that Kansas gets, we’re one of the worst,” Awerkamp said. “There are all these scary risks about increasing tax rates, but we take a look at states all over, and they have much higher tax rates, and they seem to be doing just fine.”
Sportsbooks Push Back
Naturally, the sportsbooks operating in Kansas are not happy with the prospect of increased taxes, and John Pappas, founder & CEO of Corridor Consulting, testified on their behalf, stating, “It also would be an interesting time to raise taxes above 10% when you have competition just right next door in Missouri with a market that is launching at 10%.”
Chicago Proposes City Per-Bet Tax on Sportsbooks
Illinois has put its online sportsbooks in the crosshairs, raising tax rates and even implementing a per-bet transaction fee of 25 cents per wager on a sportsbook’s first 20 million wagers. Thereafter, the rate rises to 50 cents per bet.
The major sports betting sites like FanDuel and DraftKings have responded by passing that tax off to their Illinois customers but promising to rescind it once the legislature does the same.
Chicago Follows Suit
Chicago has recently discussed adopting the per-bet tax imposed by the state for any wagers made within the city limits. The city is staring down a forecasted $1.1 billion deficit and is searching for ways to close that gap. Imposing a per-bet transaction fee would be one avenue to increase tax revenue.
The Chicago Financial Future Task Force, created by Mayor Brandon Johnson, has been searching for alternative taxation methods, and reports are that the per-bet fee would raise $17 million in revenue for the financially beleaguered city.
Currently, Chicago imposes a tax on retail sportsbooks located within the city, but not on mobile sports betting, which generates 98% of the revenue.
“Currently, the City taxes sports wagering at physical sports wagering facilities, where only 2% of all sports betting occurs,” the task force said in its interim report. “The remaining 98% of sports betting occurs online and remains untaxed.”
As of this writing, there has been no definitive action on the per-bet tax in Chicago.
