NEW YORK (Reuters) - Most U.S. states will get only a minor revenue boost from legalized sports betting even under the most optimistic scenarios, Moody’s Investors Service said on Friday.
Several states are racing to regulate and tax sports betting after the U.S. Supreme Court on May 14 overturned a 1992 law banning sports wagering except in a few places.
New Jersey brought the case to the highest U.S. court after multiple attempts to legalize the activity were challenged by sports leagues.
Those states are eying the estimated $150 billion of illegal sports wagers annually across the country, an enticing new revenue stream especially for areas hampered by years of slow economic growth.
But relative to their total budgets, the size of any revenue increase would be puny.
The 50 U.S. states could collect a combined $1.5 billion in taxes if they broadly legalized sports bets, including online wagers, and taxed at the 8 percent rate that New Jersey has proposed, Moody’s said, based on data from an Oxford Economics report commissioned by the American Gaming Association.
That $1.5 billion is less than 0.2 percent of states’ combined operating funds for fiscal 2017, Moody’s said.
A handful of states - Mississippi, Pennsylvania, Rhode Island and West Virginia - are now ahead of the rest because they began preparing early for the court’s decision, Moody’s said.
In addition, Delaware, which was one of a small number of states that allowed limited sports betting before the court’s decision, now plans to roll out full-scale sports wagering on Tuesday.
Sports betting was fully legal only in Nevada before the ruling. Plenty of states may choose not to implement sports betting.
For New Jersey, however, a long-fought dream is coming true.
A state legislative committee is expected to consider a bill on Monday that would charge an 8 percent tax on gross sports wagering revenues at casinos and racetracks, and a 12.5 percent levy on online sports bets.
On its own, sports betting would generate a “minimal lift” in revenues for Atlantic City, the state’s fiscally stressed gambling hub, according to Moody’s.
“But it should help increase tourism and boost the city’s casino-dominated economy,” Moody’s said. “At the state level, New Jersey will experience only a minor bump in tax revenue from the legal wagering relative to its budget.”
Reporting by Hilary Russ; Additional reporting by Laila Kearney; Editing by Leslie Adler