Betting on March Madness in New Jersey could generate $300 million in handle from NCAA basketball alone. Based on other markets, NCAA basketball is expected to comprise about a quarter of the state’s projected $1.2 billion in total March handle.
NCAA basketball will be a lucrative source of tax revenue in New Jersey, too. NCAA basketball alone is expected to generate $2.8 million in tax revenue this March. It’s a lot of money to come out of a single sport.
Sports betting is a seasonal business, with a peak season from September to March and a low season from April to August (while bettors await the next NFL and NBA seasons). This level of seasonality is highlighted well when we look at New Jersey’s entire revenue history. Sportsbook seasonality is even visible during the COVID shutdowns.
However, New Jersey’s previous sports betting season from September 2020 to August 2021 is unique among sports betting markets. The peak and low seasons were still distinct, but they were closer together. This peak season is higher than the previous peak season, too. That’s to be expected as New Jersey’s sports betting industry continues to mature.
Further, March 2021 handle was -0.4% of that peak season’s average handle. That’s unusually low compared to the increased handle that other sports betting markets see in March each year. This decreased variation between peak and low seasons and the explosive growth that New Jersey has already experienced this season formed the foundation of our 2022 projections.
Nerd Box: How We Predicted New Jersey March Madness Betting Figures
Projecting New Jersey’s total betting handle was straightforward. We took an average of this year’s peak season and that became our March handle figure. The average peak season handle this year was $1.2 billion, which gave us projected March handle.
That’s why New Jersey’s unusual lack of variation within its peak season and between its peak and low seasons was so important. It’s how we were able to rely on a peak season handle average with no adjustment.
Next, we assumed that NCAA betting would comprise 25% of New Jersey’s sports betting handle. That’s the case in Colorado and Virginia, where NCAA betting made up 23.6% and 27.5% of total handle, respectively. So, 25% is a reliable guide for isolating NCAA basketball handle. (And a quarter of $1.2 billion is $300 million.)
To estimate NCAA sportsbook revenue, we used New Jersey sportsbooks’ average hold to project how much money they would keep as gross revenue. Since sports betting’s legalization, New Jersey sportsbooks’ average hold was 7.5%. So we took 7.5% of projected NCAA handle to get $22.4 million in taxable NCAA revenue.
Tax Revenue From New Jersey NCAA Basketball
Projecting tax revenue required a few more steps. New Jersey sportsbook operators pay different tax rates on retail and internet sports betting. New Jersey taxes retail sports betting revenue at 8.5% and internet sports betting revenue at 13%. There’s also an additional 1.25% tax rate that goes to Atlantic City tourism and marketing programs.
So, we took an average tax rate to get an idea of how much of a sportsbook’s gross revenue trickles down to tax revenue. Since sports betting legalization, an average of 12.7% of sportsbook gross revenue ends up as tax revenue. That takes into account the different tax rates for retail and internet sports betting without having to find each month’s ratio of online to retail sports betting.
We took 12.7% of projected NCAA taxable revenue to project $2.8 million in tax revenue resulting from March Madness alone.