AP analysis: Sports betting has not been the jackpot some states expected

When the Supreme Court allowed all states to offer betting on sports, some lawmakers across the country saw an opportunity: Here was a way to bring in money for their state budgets from an activity that already had been happening in the shadows. Some states that jumped in early even passed budgets that relied on a certain amount of tax revenue from sportsbooks. An Associated Press review showed it hasn’t quite worked out like many supporters had hoped. The actual tax revenue has yet to match expectations in the majority of states that moved early to legalize sports gambling.

State Government Team reporter Geoff Mulvihill and Rhode Island statehouse reporter Jennifer McDermott looked through monthly state revenue reports and then compared the tax revenue being generated to the original estimates in the legislation that authorized sports betting. They found that in four of the six states that legalized it last year, the monthly tax revenue was far below what the state had projected it would be. Rhode Island had expected to generate more than $1 million a month for its state budget through its 51% tax on sportsbook proceeds. Mulvihill and McDermott showed that the actual revenue is only about $50,000 a month from the state's late-November launch through February. A big reason was the New England Patriots’ win in the Super Bowl and the team’s covering the spread, an outcome that cost the state's sportsbooks $2.3 million. As a result, Rhode Island Gov. Gina Raimondo said the state might have to adjust its budget to account for the missed projections.

West Virginia is taking in just a quarter of the monthly tax revenue it had projected. Tax revenue is half the estimate in Mississippi and Pennsylvania. The reasons varied by state, from slower-than-expected rollouts to the unavailability in some states of mobile betting. Critics said they weren’t surprised. Some said the legislature had set the tax rate too low, while others were skeptical about the projections in the first place, saying they were always optimistic. Supporters urged patience, saying most states had not yet allowed betting on mobile devices.

The accountability story was another cautionary tale for the states where lawmakers are considering legalizing sports betting, showing they shouldn’t necessarily count on it as a significant source of revenue. Earlier this year, Mulvihill and Atlantic City Correspondent Wayne Parry reported that taxes on sportsbooks would generate just a fraction of 1% of the overall budget in the states where it was legalized. More than 300 customers used the story about revenue falling short, and McDermott continues to trade emails about it with member reporters in states considering legalization.

The revenue story was the latest in a string of distinctive stories from reporters working the sports betting beat. They revealed that opposition from Native American tribes is a big reason why sports betting legalization efforts are going slower this year than supporters had hoped. That story was accompanied by an interactive map displaying tribal contributions and the status of legalized sports wagering in each state. They showed that legalization will not happen any time soon in the nation’s three most populous states, which represent a quarter of all teams in the four major sports. They reported that the major sports leagues had taken different approaches in demanding that states pay them a fee so they could beef up their anti-fraud operations, and that Nevada had rejected a request from Major League Baseball to ban gambling on spring training games.

Many of the stories, including the state revenue piece, have been accompanied by a data set compiled by Mulvihill that tracks every piece of legislation related to sports gambling. The spreadsheet includes key details about each bill, including its status in the state legislature, and Mulvihill updates it at least weekly. Bills are identified through tips from AP statehouse reporters, state and national bill searches, and by monitoring gambling industry media; the details are confirmed by Mulvihill reading the legislation. It is being made available on an ongoing basis to all AP customers who subscribe to our data distribution platform and has been promoted to local reporters as a way to add context to their stories.

For revealing the difference between lawmakers’ promises on tax revenue and the reality, Mulvihill and McDermott win this week’s Best of the States prize.