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But states still should not count on DFS to pay the bills, now or any time in the near future. In particular, if Illinois lawmakers are banking on DFS alone raking in large amounts of money to help balance the budget, they might want to think again.
The other day we reported on a white paper that estimates what the regulated DFS and online gambling markets would generate in Illinois. The state is considering a bill that already made it through the state Senate that would regulate and tax both DFS and online gambling. The possibility remains of DFS moving along separate from iGaming, as well.
The white paper is based on estimates and projections, but it’s also based on some hard data:
Thanks to a new law and regulation in New York, we know exactly how much revenue the sites generate, and how much the state gets in tax revenue. DraftKings and FanDuel pay 15 percent of their gross revenue in the state to the government, plus $50,000.
For the busiest five months of the year (September through January, around the daily fantasy football season), NY collected $2.8 million in taxes, the lion’s share from DraftKings and FanDuel. It might expect roughly to double that over the remaining seven months of the fiscal year.
When comparing the opportunity for DFS in Illinois, keep the following in mind:
Thanks to several years of regulated online gambling in New Jersey, we also have a good idea of how new regulated markets would respond.
A maturing market in NJ is generating $20 million in revenue each month for the past three months. That has resulted in $100 million in tax revenue heading to state coffers. NJ (nine million people), of course, is a smaller state in terms of population than Illinois.
We can also almost make an apples-to-apples comparison on raw 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’s the overall picture for the five known months of NY DFS revenue vs. NJ iGaming. (Keep in mind, also, that NJ is roughly half the size of New York.)
And here are tax receipts for the same time period. New Jersey iGaming is taxed at a slightly higher rate of 17.5 percent, with 15 percent going to the general fund. Here’s the revenue for both on the 15 percent rate:
Any single month of NJ iGaming generates almost as much than DFS did over that entire time period.
The bottom line: while DFS creates some revenue, it pales in comparison to what online gambling and poker can do. And that’s not to mention the ancillary benefits land-based gaming gets from iGaming.
The latest out of Illinois is that Gov. Bruce Rauner is calling a special session of the legislature that will span the final 10 days of June.
That will happen to deal with the state budget; state lawmakers have already gone more than two years without agreeing on a spending and revenue plan for the state.
The online gambling and DFS bill is one of many moving pieces in the legislature, and it’s not even guaranteed that the House will take up the measure.
But lawmakers should know exactly what the DFS and iGaming industries can do for their state, if they are counting on either for significant revenue.