During any gambling expansion, there is always some pushback in the legislature. But regarding sports betting, the tax dollars are a major selling point.
In Missouri, industry proponents believe the state is missing a golden opportunity with Super Bowl LVIII featuring the Kansas City Chiefs.
What percentage of sports betting revenue would Missouri collect from taxes?
Just recently, House Bill 2331 passed the Special Committee on Public Policy with a 5-2 vote. The bill would allow in-person sports betting at casinos and online wagering and place a 10% tax on adjusted gross revenue from operators.
That 10% is a pretty consistent number with other proposals in Missouri. Senate Bill 824 also would put a 10% tax on sports betting revenue.
Projections for Missouri sports betting indicate that the state could collect up to $28.9 million per year from taxes. Those tax dollars could go toward a number of things, such as public education and funding problem gambling treatment.
How much do neighboring states collect from sports betting taxes?
Iowa and Kansas are two neighboring states with legal sports betting. Iowa started taking sports wagers in August 2019. Kansas legalized the industry in September 2022. They both collect a different percentage of operator revenue for taxes.
Iowa takes a 7.5% tax on sports betting revenue. In the 2023 fiscal year, the state collected $12.9 million in taxes.
Kansas taxes its operators’ revenue at 10% – identical to the proposals in Missouri. During its first full year of legal sports betting, Kansas took in about $7 million in taxes.
Neither of these states, though, is a good model for what Missouri could expect, as both have smaller populations. There are roughly 3.19 million people living in Iowa. In Kansas, it’s around 2.94 million. In 2021, Missouri’s population was 6.18 million.
Plus, some of the money undoubtedly comes from Missourians crossing the border into those states to bet on sports.
How Super Bowl appearances from local teams affect a state’s sports betting market
The Super Bowl is the most-bet-on event in the US. And when a hometown team (or one in the region) appears in the game, there’s plenty of betting action.
For instance, when the Philadelphia Eagles played in last season’s Super Bowl, Pennsylvania collected $15.5 million in taxes in February. It must be noted that Pennsylvania taxes sports operators at a whopping 36%, more than three times the amount Missouri sports betting proposals call for.
It’s also worth noting that betting lines can significantly impact revenue, even more so if the regional favorite is an underdog.
In last year’s Super Bowl, Kansas City was the underdog, but plenty of Kansas residents (and Missouri residents crossing the border) bet on them to win. They wagered $194 million in February. Operators reported a dismal -0.5% hold percentage that month because the Chiefs won. The previous month’s hold percentage was 7.4%.
February 2023’s tax revenue in Kansas came out to just $1,134. For comparison, operators paid nearly $600,000 to the state in taxes in the previous month.
How much tax revenue could Missouri miss out on this Super Bowl?
Iowa, one of Missouri’s neighboring states, does not have a professional football team within its borders. There are many Chiefs fans, though, and during last year’s Super Bowl month, Iowa residents wagered $193.8 million on sports. Taxes for that month came out to $789,626.
Kansas might represent a closer model, given that the Chiefs reside directly on the border and have an even bigger fanbase than Iowa.
With a population half the size of Missouri’s, Kansas still managed to bet more than $190 million on the big game. That’s pretty close to Iowa’s total handle for the same month.
Let’s be conservative with Missouri and say that in a hypothetical world of Missouri sports betting, with the Chiefs playing in Super Bowl LVIII, residents could wager around $350 million this month.
Kansas City is the underdog in this game, and it’s safe to assume a sizeable chunk of the bets placed would be on the Chiefs. Should they win (and operators not get their usual share of revenue), then taxes would be low compared to other months. But with a Chiefs loss, operators would cash in.
Sticking with the Kansas example, that state had a 7% hold the month before the game. If Missouri kept a 7% hold on $350 million in wagers, that would equate to $24.5 million in revenue for operators. Missouri taking 10% of that revenue would result in a tax figure around $2.5 million for that month alone.
There are a number of factors, and, once again, this isn’t a perfect science. But Missouri residents looking to bet on sports are crossing state lines to do so. Which means that even before the Super Bowl begins, Missouri is already the loser.