Legislation to legalize sports betting in Massachusetts looked down for the count this session, but a late amendment to the budget has gotten it back in the game. Senator Tarr has introduced the amendment to the Senate’s state budget legislation, which would allow for in-person and digital sports betting in the commonwealth.
The proposal includes competitive tax rates of 10% of revenue for in-person betting, and 12.5% for online betting (and daily fantasy sports). While lower is always better –Iowa and Nevada have the lowest state tax rates at 6.25% – these rates are comparable to other states that have had success with sports betting, like New Jersey.
The problems with high tax rates are many, including making it more difficult for sports books to make ends meet, which threatens growth, job creation, and competition. A Copenhagen Economics study showed this effect in European countries, as tax rates over 15% reduce legal betting activity.
When betting activity is prevented from moving to the legal market, black market operators win. These activities can threaten integrity in sports, and drive funds toward shady, even criminal enterprises.
The Supreme Court ruling allowing states to legalize sports betting led to a 25% decrease in spending with illegal books in 2019. There is still a long way to go to limit what was estimated to be a $150 billon black market for sports betting.
Senator Tarr’s proposal in Massachusetts would be a win on multiple counts, creating a competitive market for online and in-person sports betting with modest tax rates, creating economic growth in the legal market and reducing illegal betting activity. It certainly seems overdo for a sports-hungry state.
There are still pitfalls that must be avoided by the state’s gaming commission, which will have regulatory authority. Licensing fees, which can amount to just another tax when jacked up to grab revenue, must be kept low into the future. Further, the state should steer clear of regulatory traps, like official league data mandates that require all sports books to use the preferred data of sports leagues (even though sports stats are public information and there are many providers).
These same guidelines should also be followed by Florida, as a new compact with the Seminole tribe moves forward that would allow sports betting in the state.