Rhode Island sports betting received its official legislative go-ahead recently, allowing the state to join quickly a growing US legal sports betting market.
Compared to larger states, Rhode Island’s nascent sports wagering operation will begin relatively small. Just two casinos — Twin Rivers properties in Lincoln and Tiverton — will offer legal sports betting this year. Twin Rivers spokesperson Patti Doyle said the casinos are targeting an October launch date for sports betting.
Those casinos might not expect to make a significant profit under Rhode Island’s sports betting revenue structure that heavily favors the state. It might not be called taxation, but Rhode Island’s setup ends up serving as a hefty effective tax rate on Twin Rivers. Doyle declined comment on the state’s policy.
High taxes could slow sports betting growth
Casinos that cannot reap profits from sports betting might not market it or offer competitive pricing to attract customers to the legal market. It’s a situation the American Gaming Association and casino interests are monitoring in Rhode Island and beyond.
“States should focus on the consumer experience and empower licensed, regulated operators the ability to offer a competitive product that fosters betting in a safe way and shuts down the illegal market,” said Sara Slane, the AGA’s senior vice president of public affairs. “High tax rates hinder the legal market’s ability to compete with shady, illegal operators that don’t pay taxes back to the state.”
How the pie will be sliced in Rhode Island
Rhode Island sports betting functions under the state’s lottery. Essentially, Twin Rivers casinos function as partners of the state in operating sports betting. IGT serves as the state’s official vendor in administering Rhode Island sports betting and receives a healthy share of revenue in return.
Here’s how Rhode Island divvies up sports betting revenue:
- State: 51 percent
- IGT: 32 percent
- Casinos: 17 percent
Put simply, for every $100 in sports betting revenue, Twin Rivers keeps $17 while Rhode Island grabs $51. While it does not have this designation, that essentially means Rhode Island set a 51 percent effective tax rate on sports betting revenue.
Delaware uses a similar arrangement
The first state in the post-PASPA landscape to start up single-game wagering, Delaware sports betting also calls its system revenue-sharing. Three state casinos — Dover Downs, Delaware Park, and Harrington Raceway & Casino — are authorized to take sports wagers.
“(Delaware) doesn’t tax the casinos, they are our partners and we revenue share,” said Vernon Kirk, the state’s lottery director, in an email to Legal Sports Report. “Video lottery, table games and sports betting all operate under the Lottery’s administrative and regulatory oversight.
“For sports betting at the casinos, after winners are paid, Scientific Games (central system, terminals, risk management) receives 12.5 percent. From the remainder, the State share is 50 percent, the casinos get 40 percent, and ten percent goes to supplement horse racing purses.”
While that still puts Delaware at what amounts to a 50 percent state tax rate, casinos keep more revenue than they do in Rhode Island.
Tax structure a key measure of growth potential
Most states entering the legal sports betting space will utilize a tax structure modeled after Nevada. The Silver State taxes gross gaming revenue for all operators, as it has for decades. Its 6.75 percent rate is the country’s lowest.
Here’s how other states entering legal sports betting this year compare:
- New Jersey sports betting: 8.5 percent for land-based sports betting revenue, 13 percent for online wagering run by casinos, 14.25 percent for online wagering run by racetracks.
- West Virginia sports betting: Ten percent
- Mississippi sports betting: 12 percent
- Pennsylvania sports betting: 36 percent (plus $10 million per operator licensing fee)