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The Greater Boston Chamber of Commerce offered comments to the conference committee on H.3993/S.2862, An Act regulating sports wagering. The Chamber supports legalizing sports wagering in the Commonwealth and applauds the House and Senate for advancing proposals to regulate an activity already occurring in the black market and legally in neighboring states. We encourage the conference committee to present a final report to the full Legislature before July 31st that allows for competitive sports wagering options, empowers the Gaming Commission to regulated and monitor the market, and creates built-in protections for abnormal betting activity and problem gambling.
In contrast to black market wagering, the Gaming Commission and licensees in a regulated environment can quickly and effectively identify bad actors or irregular behavior, protecting both consumers and the integrity of sporting events. Along with a safer product, embracing sports wagering provides an economic boost to the Commonwealth by creating jobs and growth opportunities in sporting and entertainment sectors.
However, eliminating the black market for sports wagering is critical to the success of this new regulated industry. Convincing individuals to embrace the legal market will maximize consumer protection effectiveness and new revenue to the state. Policies that place the Commonwealth well outside the norm of regulation and competitiveness will hurt the state’s efforts to regulate sports wagering effectively, which risks the continued use of offshore apps and other means of illegal betting.
Competitive Tax Rates
Legal sports wagering, like other forms of gaming in the Commonwealth, should be regulated and taxed. While not as lucrative as licensed casino gaming, sports wagering will still provide meaningful revenue to the state through licensing fees and wagers which can be dedicated to important public policy initiatives.
However, tax rates should be competitive with other jurisdictions and targeted to eliminating lower cost, illegal options that bettors may already use. These options, particularly mobile apps associated with
offshore sportsbooks, will not disappear overnight once sports wagering becomes legal. While short-term tax revenue is important, in the long-term revenues will be bolstered by widespread acceptance of the legal market over illicit options. Any tax rate imposed on sports wagering should be reasonable and allow for the healthy growth of a new industry operating on slim margins.
The establishment of this new industry is not unlike the legalization of cannabis, where a widely used and entrenched black market existed as a new regulatory framework took hold. As this market continues to mature, the regulated cannabis market produced over $3 billion in retail sales since 2018.[i] Retail cannabis products are subject to an excise tax of 10.75%, excluding sales and optional local taxes. This is a useful benchmark for taxes that allow for a newly regulated industry to thrive.
Looking at peer states, Connecticut taxes sports wagering gross gaming revenues at 13.75% for retail establishments, and 18% for mobile betting. Maryland adopted a tax rate of 15%, and New Jersey 14.25% on revenues. These states offer sports wagering through multiple mobile and retail licensees in competition with each other, similar to the structure under consideration in Massachusetts under both House and Senate bills.
In contrast, New Hampshire and Rhode Island, which have higher tax rates, adopted a very different regulatory structure by offering sports wagering through their lottery monopolies. In these states, only one operator is allowed to offer sports wagering products either through a mobile outlet or at retail establishments. In New Hampshire specifically, the operator offered a higher percentage of gross revenue sharing with the state solely in exchange for exclusive rights to offer sports wagering, eliminating competitors and becoming the sole option for legal bets. Neither the House nor Senate contemplate this type of regulatory approach, and therefore should avoid comparisons to states with sharply different licensing approaches.
Finally, one tool to encourage bettors to use newly licensed sports wagering options is promotions, which allow bettors to try sport wagering products through special offers by operators. These promotions should be excluded from gross sports wagering revenues to create parity with other legal gaming options at existing gaming establishments and assist in a full shift to the legal market.
While some reasonable restrictions on sports wagering advertising may be advisable, gametime whistle-to-whistle bans are an overly blunt tool, serve to perpetuate the illicit market, and are likely unconstitutional.
Most sports wagerers are fans, and convincing these active audiences to embrace legal, regulated sports wagering during games is another key tool to early market success. There are also several practical implementation problems with such bans, particularly in New England where our sports teams are supported regionally across many state lines and television markets. State-by-state restrictions will be difficult for broadcasters to navigate and may result in a total blackout of sports wagering advertising during athletic events. Exactly at the time when fans should be encouraged to use licensed betting products, the bans would risk keeping bettors on familiar, illegal offshore applications.
Daily Fantasy Sports
Daily fantasy sports is legal in Massachusetts, and has been since 2016 when authorized by the Legislature. Governed by regulations promulgated by the Attorney General’s Office, operators must place limits on monthly individual losses and ensure only those over the age of 21 participate in the offerings. There are no state license fees or taxes on daily fantasy sports.
However, S.2862 places new restrictions, taxes, and fees on a growing industry already operating successfully in Massachusetts. These proposals are unnecessary and will only hurt our local operators as they seek to grow in the Commonwealth. The industry already provides hundreds of jobs in Massachusetts and is poised for further growth. This type of homegrown success should provide an
example of why businesses should locate here. Imposing drastically high taxes in this bill – on an industry outside of sports wagering – is unnecessary and discriminatory, particularly when the state has ample revenue at its disposal. Not included in the many other iterations of sports wagering legislation and with little public discussion, these new regulations and tax rates send a chilling signal to innovative companies that may consider locating to Massachusetts or when deciding whether to remain in-state.