Sports betting first went live in the state of North Carolina in 2019, barely a year after the United States Supreme Court voted to overturn a federal ban on the pastime. While North Carolina was one of the early adopters of legalized sports betting, they’ve done so in fits and starts, beginning by limiting wagers to a handful of in-person sportsbooks at Native American tribal casinos.
This past year, Governor Roy Cooper led North Carolina politicians in taking the next step, making it so that mobile sportsbooks will go live in the state in early January.
Here’s a look at how the pending legalization will affect business in the Tar Heel State, and trends to keep an eye on ahead of the launch date.
A New Approach to Tax Revenue in North Carolina
One of the biggest benefits for North Carolina biding their time in legalizing mobile sports betting is that the state legislature had a chance to see what did and didn’t work in other states. Rather than throwing themselves into the fire and having to figure things out on the fly, North Carolina lawmakers have allowed other states to be the test dummies.
One of the biggest complaints about legal sports betting so far is that sportsbooks and casinos have been able to play fast and loose with tax law, cutting back on the amount of revenue that states can gain from the industry. That’s because most states allow sportsbooks to write off the money that they lose from promotions like second-chance bets and deposit matches, so bookies can draw in new customers with these lucrative offers without really risking anything.
If a new customer loses a bet, sportsbooks can collect the money wagered. If the new customer wins, sportsbooks can write the loss off as a business expense, reducing the amount of taxes they have to pay.
Many of the states that have already legalized sports betting are looking into passing legislation to patch that loophole, and North Carolina was quick to learn from their mistakes, making sure to nip the idea in the bud.
NC House Bill 347 — the bill in question that legalized sports betting — prohibits sportsbooks from deducting North Carolina betting promos from their taxable revenue, preventing the sportsbooks from playing fast and loose with the rules.
Industry Projections
There are a few different factors to keep in mind when trying to project how much revenue the betting industry will bring in. State population plays a major role, of course, as a more densely populated state goes hand in hand with more prospective bettors.
Another factor to keep in mind is tax rates: New York, for instance, set their gaming tax at a whopping 51 percent, helping them to bring in more than $1 billion in tax revenue in their first year of operation.
North Carolina, meanwhile, won’t be anywhere near so draconian, as they’ll tax 5.25 percent of the money that bettors win and 18 percent of the money that sportsbooks win. They may not bring in as much money as New York does, but it’s also more likely that people will want to bet if they know that they can pocket the majority of their earnings.
Right now, North Carolina is projected to make as much as $126 million in tax revenue in their first full year of operation, a handle that would rank them as one of the five most lucrative states in the country in the category.
Other Market Factors
One thing to keep in mind is that the sports betting market operates under a different schedule than most other businesses. The industry ebbs and flows with the various professional and collegiate seasons, with major sporting events like March Madness and the Super Bowl serving as the gambling equivalent of Black Friday sales.
Similarly, those market variations can vary quite a bit from state to state. In the Deep South, for instance, college football is far more popular than the NFL is, making fall Saturdays one of the biggest drivers of revenue. Here in North Carolina, where college basketball is king, I’d imagine that March Madness will be one of the state’s flagship betting events, especially if the Tar Heels or Blue Devils seem poised to make a deep run.
Generally speaking, fans are more likely to want to place bets on their favorite team instead of against them if given the choice, so it also helps to have successful teams. The 1-11 Carolina Panthers, for instance, probably wouldn’t attract too many bettors right now.
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