Nevada Rep. Dina Titus was the lone voice in Congress seven years ago when she sought to remove an antiquated federal excise tax on sports wagers. At the time, the Silver State was the nation’s only full-scale and legal sports betting market.
Nevada is no longer alone in the sports betting realm.
Earlier this month, North Carolina became the nation’s 22nd legal sports betting jurisdiction when Caesars Entertainment opened sportsbooks at two casinos the company operates for the Eastern Band of Cherokee Indians.
The William Hill US sportsbook at the STRAT in Last Vegas on opening day in 2019/Photo via Marc Meltzer on Twitter @meltzvegas
Four states could launch sports betting by the time the football season kicks off in the fall. Another 16 have active or pre-filed sports betting legislation.
Still, the handle tax – a 0.25% fee placed on all sports wagers – remains on the books.
The fee was put into place in the 1950s to combat illegal gambling activities. Yet the tax only seems to penalize legal sports betting operators.
“The handle tax is only directed at wagers placed and accepted in the U.S.,” Titus said last week in prepared remarks to House Ways and Means Committee. “The vast majority of illegal gambling, however, occurs over the Internet with offshore operators. The handle tax was designed to punish illegal gaming operators. But because of the way the industry has evolved, now it rewards them.”
Titus and Pennsylvania Rep. Guy Reschenthaler introduced legislation last year to kill the handle tax. It went nowhere in a hopelessly deadlocked Congress. She plans to reintroduce the bill again.
Pandemic-related closures and COVID-19 operating restrictions sent the commercial casino industry to a 31.3% gaming-revenue decline in 2020. Sports betting, however, expanded and flourished. The activity accounted for $1.53 billion in revenues, according to the American Gaming Association, a nearly 69% increase over 2019 when 13 states offered it.
The Internal Revenue Service, which has never been able to say how the money raised by the handle tax is used, doesn’t comment on legislative matters.
But the AGA is backing Titus’ goal of eliminating the handle tax since it does nothing to stop illegal and unregulated offshore sports betting operators who avoid paying any fees or taxes.
AGA Senior Vice President of Government Relations Chris Cylke said in an email that seven decades after the handle tax was introduced, it only gives the black market “a leg up” over the legal sports community.
“It’s time for Congress to eliminate this outdated, counterproductive tax which provides little revenue to the federal government and unintentionally impedes our shared goal of moving customers away from the predatory illegal market to safe, regulated, betting channels,” Cylke said.
Titus, a Democrat whose district includes the Strip, chairs the Congressional Gaming Caucus with Reschenthaler, a Republican. So the effort to end the handle tax is bipartisan.
Rep. Dina Titus, D-Nevada
Nevada sportsbooks took in $4.3 billion during 2020. Pennsylvania took in $3.5 billion in sports wagers. In recent state gaming reports covering February’s sports wagering numbers, New Jersey sportsbooks took in $743 million in bets, Nevada $554 million, Pennsylvania $510 million, Michigan $326 million, and Indiana $274 million.
We have no idea how much was wagered with the illegal sportsbooks, but experts say the figure is substantial.
Titus noted that Congress exempted certain types of sports betting from the handle tax, including horse racing. She said the same treatment should be provided for all sports betting.
“The law provides illegal operators an unfair competitive advantage, which they use to provide better odds, thereby luring players to those Internet-based games,” she said.
Congress is already divided by partisanship on a myriad of issues – continued COVID-19 recovery, the economy, immigration reform, and infrastructure funding.
By the end of the year, sports betting could be active in more than half of the U.S. That issue touches both sides of the aisle.
“A significant percentage of Congress has become more aware of their constituents’ desire for a legal sports betting market, as well as the potential revenue it can bring to their states,” Cylke said. “When federal lawmakers learn more about these excise taxes, we believe they will be receptive to addressing this outdated policy, which gives illegal sportsbooks a competitive advantage and does nothing to benefit their communities.”
Howard Stutz is the executive editor of CDC Gaming Reports. He can be reached at hstutz@cdcgmaing.com. Follow @howardstutz on Twitter.
