New Jersey lawmakers maintained rosy outlooks when NJ sports betting was legalized in June.
A reasonable 8.5 percent tax on wagering revenue was perceived to create enough competition in the Garden State, which would ideally lead to a boon for the state’s economy.
“Today, we’re finally making the dream of legalized sports betting a reality for New Jersey,” Gov. Phil Murphy said after signing the bill two months ago. “I’m thrilled to sign Assembly Bill 4111 because it means that our casinos in Atlantic City and our racetracks throughout our state can attract new business and new fans, boosting their own long-term financial prospects. This is the right move for New Jersey and it will strengthen our economy.”
Fitch Ratings, though, disagrees, to an extent. In a recent press release, the Wall Street statistical rating organization said the economic boost will realistically be more modest than anticipated.
Seeking a balance
In its release, Fitch used data from July NJ sports betting revenue — the state’s first full month of wagering — to determine that taxed revenue “will be relatively modest as most states will seek to balance tax gains with encouraging operator participation.”
Fitch concluded that “secondary tax revenue” such as consumer participation in other gaming and entertainment, food and lodging, would result in a “more significant boost” to states’ rakes on sports betting. Even there, the agency said, taxed revenue is “still modest in the context of overall budgets.”
That said, those amenities could lead to an increase in sports bettors, which could increase tax revenue.
In July, NJ sportsbooks accepted $57 million in wagers, resulting in just $620,000 in tax. That actually reflects a 0.9 percent drop from June, when the state taxed $293,863 of the $16,409,619 handle.
The New Jersey state budget for 2019 foresees sports betting tax revenue reaching $25 million, which would account for 11 percent of total gaming revenue in the state and less than 1 percent of the state’s revenue projections.
Interestingly, in June, Murphy joined Mike Francesa on WFAN and noted that his original outlook on tax revenue may have been too lofty. Murphy said he expected tax revenue to be “more modest” than initially projected.
New Jersey not alone in modest tax
Fitch did not base its conclusion solely on New Jersey’s first few months of regulated sports betting.
Delaware, the agency pointed out, collected $15 million in wagers through July. That handle, however, led to a mere $668,000 in tax revenue for the state.
Certainly, the sample size is small, Fitch conceded. Yet with Mississippi and West Virginia rolling out sports betting operations, figures from those states could influence future findings. Pennsylvania could also debut sports betting operations later this year or in 2019.
NJ sports betting helps bigger picture
Of course, sports betting in New Jersey grabs attention. A newly regulated industry is still blossoming, after all, and we all want to know how it will thrive.
Fitch, however, noted that sports wagering has helped rebuild the gaming market in the Garden State.
Year-over-year, Fitch said, Atlantic City casinos enjoyed a more-than 10 percent bump in revenue thanks, in part, to the implementation of sports betting and the openings of two new casinos (Ocean Resort Casino and Hard Rock Atlantic City). Total gaming revenue increased 13 percent, and state gaming tax spiked 12.5 percent.
Despite all of these findings, one thing is clear: It’s still a little early to develop set conclusions. Delaware was the first to launch legalized sports betting, and that industry is not even three months old.
In New Jersey, sportsbooks — physical and mobile — are still being introduced. Some experts believe the Garden State could overtake Nevada as the sports betting leader nationwide.
“It’s definitely a small start,” David Schwartz, director of the Center for Gaming Research at UNLV, said recently. “But I think it has the potential to do a lot more.”