The repeal of PASPA in 2018 allowed each state to decide whether to regulate local sportsbooks. This repeal was a game-changer, and 38 states, plus Washington, D.C., now offer some type of sports betting to anyone of appropriate age standing inside their borders.
The reason for the rapid spread of sports betting in the United States is money. Creating odds for pro and college matches requires precise calculations so that wagers are submitted evenly for both teams or players.
If sportsbooks are operating properly, they’ll break perfectly even on betting wins and losses from a fiscal perspective. Any profits earned by the book are based on scrape, otherwise known as juice or nectar.
The odds that are wagered on feature additional odds in parenthesis. That’s the juice that sportsbooks keep. Take the following betting line as an example:
New York Jets vs. Miami Dolphins
- Spread: Jets -2.0 (-110), Dolphins +2.0 (-110)
If I bet on the Miami Dolphins to cover the spread, they’ll need to lose by 1 or fewer points for my wager to win. Let’s say Miami covers, and we risked $10. A net profit of $9 will earned because $1 will be kept by the house based on the -110 rate of nectar.
We say all this to illustrate how difficult it is for sportsbooks to make money. Pure sportsbooks rely on volume for sports betting revenue, while land-based casinos include them to attract players to their more profitable casino games.
Does it make sense for the federal government to impose an additional tax on these domestic operations, considering the already low rate of profitability? US Senator from Nevada, Cortez Masto (D), says no.
The WAGER Act (Withdrawing Arduous Gaming Excise Rates) has been introduced by Masto and Senator Cindy Hyde-Smith, a Republican from Mississippi. The intent of the Act is to remove all federal taxes imposed on handle and sportsbook employees.
“My bipartisan legislation will ensure our sports gaming industry can provide essential tax relief to consumers and our sports gaming industry, creating more jobs and keeping our tax money in the state while cracking down on illegal activities.”
Senator Cortez Masto
The US Department of Revenue currently collects 0.25% on every wager placed domestically. In addition, there is a $50 tax per sportsbook employee imposed each year.
If the WAGER Act passes successfully, the feds will no longer collect those dollars, allowing each state to retain a better cut of its own action. Nevada paid in excess of $22 million in federal sports betting taxes in 2022.
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