Puerto Rico Governor Ricardo Rosselló has proposed legislation to legalize online and live gambling. A full suite of gambling is in the bill, including esports, fantasy sports and sports betting, both on and offline.
In the press release, Rosselló explained:
“Our administration is committed to new and creative ways to improve the lives of all Puerto Ricans, especially as we continue our reconstruction in the aftermath of Hurricane Maria. This legislation, made possible by a Supreme Court decision last year, will make Puerto Rico an attractive place to visit, which will greatly benefit our tourism industry.”
He quoted two studies on potential revenues. The first study was commissioned by the Chamber of Commerce of Puerto Rico and was prepared by The Innovation Group. The government commissioned the second from the Spectrum Gaming Group. Both made ambitious gaming tax revenue forecasts:
- Innovation Group: Estimated revenues to the Government at $29 million for 2020, $51 million for 2021, $68 million for 2022, $77 million for 2023 and $87 million for 2024.
- Spectrum Gaming Group: Estimated sports betting revenues for PR, both physical and online, of between $44 and $62 million a year. This is gross gaming revenue so the gaming tax receipts will depend on what tax rates the legislature finally decides. Spectrum’s report assumes a 15 percent tax rate or lower.
The tax revenue projections look just a little ambitious. Puerto Rico’s population is only 3.2 million with a GDP per capita around half that of New Jersey. New Jersey’s population is just under nine million.
New Jersey pulled in total gambling tax revenues of $20.5 million in February. A 28-day month, but simply run that forward and tax revenues for 2019 should come in at well over $250 million. Especially because sports betting revenues are still on a high growth trajectory.
If Puerto Rico can generate a sixth of that, it will be looking at around $42 million a year. Esports and fantasy sports may sound forward-looking, but revenues will not probably not add much more to the tax take — at least in the short term.
The proposed tax rate is not yet public, but whatever level it is set at is unlikely to bring in more money than New Jersey. New Jersey has set its tax rates at levels that are pretty much ideal for generating the maximum revenues.
Puerto Rico needs the money from sports betting
Focusing on the money is everything for Puerto Rico. A debt crisis in 2017 saw the government face a shutdown and unable to fund healthcare. If that wasn’t enough, Hurricane Maria hit in September that year.
Puerto Rico’s infrastructure was badly damaged. Electricity was off for months in some areas and all the territory’s airports only re-opened half a year later.
The US Supreme Court decision on sports betting in May 2018 gave Puerto Rico the opportunity to add gaming revenue. Although not a US state, Puerto Rico is bound by federal law. Prior to the overturn of PASPA, sports betting would not have been legal.
The governor hopes that tourism will add extra revenues. From the PR:
“The legislation will make it possible for Puerto Rico to be marketed nationally and internationally as an attractive destination for the millions of people who bet on gambling.”
Puerto Rico deserves sympathy and help after the immense suffering caused by Hurricane Maria. Legal online gambling and sports betting is a sensible option for generating at least some extra tax revenues.
The Legislative Assembly must now approve the legislation before it goes back for the governor’s signature. The tax revenues may be urgent, but the legislative process cannot be hurried. 2020 is the earliest that any legal sports betting is likely to launch.