Virginia Exceeds $1 Billion In Gross Sports Betting Profits
Recently, licensed operators submitted a May 2023 sports betting activity report to the Virginia Lottery, which the Lottery then officially unveiled. The report showed that Virginia exceeded $1 billion in gross sports betting operator income, making it the seventh US state in the post-PASPA (Professional and Amateur Sports Protection Act of 1992) era to tops it. Additionally, the report comes after the Virginia Lottery announced that sportsbooks generated $48.1 million in gross income for May.
Higher income compared to May last year:
Analyzing the aforementioned report, it is shown that between May 1 and May 31, 2023, Virginians wagered $403.719.160 (“handle”), which is 14.9% more than last May. In addition, Virginia bettors earned a total of $355.574.610 for a combined operator winning percentage of 11.93% (“hold”).
However, Virginia law “places a 15% tax on sports betting activity based on each permit holder’s adjusted gross revenue (AGR), which is defined as total wagers minus total winnings and other authorized deductions.” Regarding the AGR sports wagering tax, the statute states that “97.5% is to be deposited in the state’s General Fund and 2.5 percent is to be deposited into the Problem Gambling Treatment and Support Fund administered by the Virginia Department of Behavioral Health and Developmental Services.” Furthermore, 11 Virginia operators reported a net positive AGR for May, meaning they paid $6.3 million in taxes for the month.
Virginia achieved this key step 29 months after betting officially became legal in late January 2021. It is also now safe to say that it has joined New York, New Jersey, Illinois, Nevada, Indiana and Pennsylvania in reaching this important figure in terms of revenue.
A constant number of bettors:
The state has proven time and time again that it has no shortage of bettors, as “its all-time hold on more than $10.4 billion handle is just over 9.6%, and operators statewide have had a win rate of 9.1% or higher for 10 months running.” Moreover, May’s total of $403.7 million in accepted bets was in line with a iconic loss for sportsbooks nationwide for the month, as Virginia’s 11.9% hold for the third month in the row in double digits currently ranks 12th among the 25 states that have published figures.
However, Virginia was able to implement its 15% tax rate to $42.5 million in adjusted gross income, which resulted in an inflow of almost $6.3 million into state treasury. Last year’s budget amendment, which significantly reduced deductions for promotional credits for operators, played a role in the dramatic increase in tax revenue for both fiscal 2023 and the first five months of the year.
Sports betting tax increase:
What’s more, Virginia increased its sports betting tax by $67.1 million in the first 11 months of fiscal year 2023, while the $30.5 million accumulated during the first five months of 2023 is $17.2 million compared to the 2022 pace better and is currently in ninth place at the national level. In addition, the state accumulated $35.5 million in tax receipts in the first 18 months of legal wagering before the budget amendment took effect last July.
The Virginia Lottery does not reveal handle and income data by operator in its monthly report, but emphasized that 11 operators ended up with a net positive AGR that enabled the state to collect taxes. Additionally, it was not clear if the state’s two retail sportsbooks were among the 11 that paid taxes, but according to previous Freedom of Information Act requests filed by the Virginia Lottery, much of the approximately $3.8 million in allowable deductions for May likely came from Bet365.
Bet365 entered the Virginia market in January and can deduct promotional credits from its gross profit over 12 months. In May, Bet365 had “an overall AGR of almost minus-$4.8 million despite reporting close to $10.5 million in gross revenue since launch, while posting a healthy 16.9% hold.” Additionally, “statewide, handle was up nearly 15% compared to May 2022, while gross revenue rose 13.2%. Adjusted revenue, however, was up 54.6% versus last year, with the 2023 total more than $15 million higher. May’s handle was 5.2% lower than April, but gross revenue ticked 6.7% higher.”
Virginia sportsbooks accepted nearly $2.3 billion in wagers in 2023, which represents an 8.6% increase over the first five months of 2022. Furthermore, gross profits rose by nearly one-third to $238 million, with the help of a hold of 10.4% which is nearly 2% more than last year. Also, adjusted gross revenue in the 2023 increased 125% to $199.6 million, because the state implemented taxes on 83.9% of profits this year compared to 49.5% in the first five months of last year.