California Dealing With Potential $30b Sport Wagering Treasure

If voters in the state of California allow online and actual sports betting later this year it will open the door to a industry that, according to estimates from PlayCA.com, has the potential to produce more than $30bn in wagers per year.

Last week, the California Assembly took a big step towards legalisation in the Golden State by providing information on compliance of ACA 16 and SCA 6.

The new language in the legislation, originally introduced by Senator Bill Dodd and Assembly Member Adam Gray in June 2019, would change the state constitution to allow the operation at the tribal casinos and racetracks of the state if approved by voters, but not in their cardrooms.

In addition, a tax rate of 10 percent on gross income on in-person wagering and a tax of 15 percent on mobile or online wagering will be set, as well as taxes levied on platform operators rather than the tribes directly, which would be done to avoid sovereignty issues.

In contrast, New Jersey, the nation’s largest online sports betting market, levies a 13 percent tax on on online sports betting revenue and a 9.75 percent tax on retail sportsbook revenue. Pennsylvania levies a 36 percent premium by contract, by far the highest in the country.

With this in mind, analysts stipulate that, according to PlayCA.com figures, the area could produce $240 million in operator revenue and $36 million in state taxes annually from online sports betting and another $60 million in operator revenue and $6 million in taxes a year from in-person betting. These wagers will produce operator income in the area of $2 m and state taxes of $300 m a year.

Dustin Gouker, chief analyst for PlayCA.com said: “California is the holy grail of sports betting markets, and not just because of its sheer size.

“It appears that legislators are working to put in place a structure that will make California uniquely attractive to every major operator.

“And because it has the potential to be the largest legal sports betting market in the US, ultimately it represents a seismic shift in the industry.

“The tax rates are fair for both operators and the state, and would be competitive with many of the states that have already legalised sports betting.

“The rate certainly won’t scare off sportsbook operators, who are all eager to enter California. This balanced approach should help the market ramp-up quickly once the industry launches, which is ideal considering California’s budget crunch.”

The bill also needs to be approved by the state assembly and senate, which Governor Gavin Newsom will then sign before it can make its way to the ballots this fall.