States of Sports Betting, Part 1: Can Virginia Learn From Other States’ Triumphs?

Virginia is likely just a few weeks away from the launch of its online sports betting market. This week, Play Virginia speaks to writers from our network who cover sports betting in other states. We wanted to understand what those states are doing right, what they’re doing wrong, and how Virginia’s regulators and first sportsbook operators could learn from their successes and failures.

Today is the first installment of our three-part “States of Sports Betting” series. We look at what Pennsylvania, New Jersey, Colorado, Indiana and other states have done to build thriving markets and happy sports-betting customers.

Can Virginia replicate that type of success? Did Virginia lawmakers and regulators set up a system that’s conducive to a competitive and thriving marketplace? Let’s see what we can learn from other states.

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The US Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) in 2018. It ushered in a new era of legal US sports betting. Perhaps as no surprise, the states that were early adopters have often thrived in this new legal market.

Since that pivotal SCOTUS decision, sports bettors have legally wagered nearly $33 billion as more and more states launch their markets.

Sure, Nevada, which largely had a legal sports betting monopoly until the fall of PASPA, remains a leader with $11.5 billion in wagers since 2018. However, states such as New Jersey ($10.9 billion), Pennsylvania ($4 billion) and Indiana ($1.9 billion) have all started closing the gap.

Why have those particular states emerged as the early pacesetters? It doesn’t come down to one thing. Quite the opposite, in fact.

“The best aspect of Indiana sports betting is, well, everything,” Jake Garza of PlayIndiana said. “If you were going to design a perfect sports betting market from scratch, copying the Hoosier State would be a great idea.”

New Jersey is no different, said Bill Gelman of PlayNJ. It’s one reason many locales are keeping an eye on the Garden State as they work toward their own launch.

“The best aspect is that New Jersey seems to have set the stage with a system and regulations that other jurisdictions try to follow or at least talk to NJ about,” Gelman said.

Can Virginia sports betting draw customers?

For Virginia sports betting to thrive, it needs customers. And to get those bettors, it needs to be a more attractive choice than other options — legal or otherwise.

On the legal front, Virginia is surrounded by states that were sports-betting trailblazers. West Virginia and Pennsylvania now have thriving markets. Tennessee is also now live and finding its footing. Washington, DC, is also live, though with some glaring limitations. Other neighboring states such as North Carolina and Maryland are also now legal and gearing up for future market launches.

To keep Virginia sports bettors from venturing to the other states — or even to illegal and unregulated offshore sportsbooks — the market must offer what they want. And as we learned in other states, most of the items on sports bettors’ wishlists are universal:

Online sign-ups

Want bettors to use your online sportsbooks? Don’t force them to go anywhere, especially — and we can’t stress this enough — during a damn pandemic. After all, sportsbooks have the tools to verify their players’ identities without them needing to leave home.

In October, Colorado was sixth-best in the US with a $210.7 million sports betting handle. Making the sign-up process easy was a big reason why.

“From a user perspective, the forethought to allow mobile sign-ups was genius,” Ian St. Clair of PlayColorado said. “Obviously, Colorado had no clue the state and country were headed toward a global pandemic when it was approved, but to give users the ability and ease to sign up for apps from their couch is the ‘chef’s kiss.’ The easier you can make things for users, the better.”

That’s good news for Virginia, where the market initially will be completely online.

Easy online betting

Once players are verified, make the process to actually place a wager an easy one. That’s another lesson we learned.

New Jersey sportsbook operators such as FanDuel Sportsbook and DraftKings Sportsbook are the current market leaders, and it’s intuitive to use both their apps.

“While (retail-based betting) adds an amenity to casinos/racetracks, mobile sports betting is what the future of this industry is all about,” Gelman said. “About 90% of (New Jersey’s) monthly wagers come in via the mobile apps, and there will very likely be over 20 options by early next year.”

Wide variety of betting options

Sure, sportsbooks can count on NFL betting to make or break their businesses. The NBA, NHL, MLB and the major NCAA sports — football and men’s basketball — are also crucial to the bottom line. But bettors’ tastes come in all shapes and sizes, and sportsbooks and regulators better be ready to deliver.

“The (Indiana Gaming Commission) has kept an open mind when it comes to betting options,” Garza said. “You can bet on practically anything you can think of here, which is nice. You can bet on everything from gambling staples like football and basketball to more obscure things like pro bowling and candy-eating contests.”

Just look at the list of approved betting options in New Jersey. The NJ Division of Gaming Enforcement allows betting on everything from sailing to volleyball to handball to lawn bowling. It was even the first US state to allow betting on Oscars winners. As they say, variety is the spice of life. And when it comes to healthy sports betting markets, states need to keep it spicy.

Betting on in-state schools

Speaking of giving players what they want, this one seems obvious: Let bettors wager on their favorite teams.

Take West Virginia, for example. With 1.8 million residents, WV ranks in the bottom quarter of US states by population. The state also has no professional sports teams. However, West Virginia does have some hugely popular college teams, notably the West Virginia University Mountaineers and Marshall Thundering Herd.

“It is helpful to have a full slate of college betting when many states consider college-betting bans,” Kimberly Yuhl of PlayWV said. “West Virginia is a big college sports state, and while college football doesn’t eclipse NFL betting, it is a significant portion of the fall and spring numbers.”

Unfortunately for Virginia, which also has no major professional sports teams, lawmakers banned VA sportsbooks from taking wagers on in-state colleges and universities. It was an unfortunate but needed condition to get sports betting legalized in the commonwealth.

Reasonable tax rate

On the regulator side, states need to make their markets as business-friendly as possible. And the best way to do that? As many writers from other states told us, a reasonable tax rate is key. Sportsbooks are generally competing against offshore operators, which pay no state tax.

Most states are in the 10-20% range. Perhaps not surprisingly, most of the states with the lowest rates are seeing operators funnel some of those savings into massive marketing and promotional campaigns.

“The best aspect of the Iowa market is the 6.75% tax rate,” Derek Helling of PlayIA said. “It’s the lowest in the nation, alongside only Nevada. Given the sparse population and the lack of high-profile sports teams in the state, it was pretty much essential to make the market competitive.”

That strategy also worked in Colorado, where operators were eager to enter the market.

“As for the operators, the big thing is how tax-friendly the state is,” St. Clair said. “At 10%, it’s one of the main reasons so many sportsbooks, like Californians, want to move to Colorado.”

Michigan will soon launch its own market. And as Matt Schoch of PlayMichigan said, “The 8.4% tax rate is also favorable, meaning nearly every major operator is interested in the Michigan market.”

With its 15% tax rate, Virginia remains a fairly attractive option for operators.

Virginia vs. offshore sportsbooks

In addition to increased revenue for states, legal US sports betting also moves the industry away from offshore books that serve the US illegally.

Even in legal states, some players prefer the international options. Although there’s often little recourse in the event of a dispute or an operator going belly up, players are willing to press their luck. Some of the reasons?

• Better lines and odds
• Deposit and reload bonuses
• Promotions, contests and giveaways

Those features aren’t exclusive to offshore books. However, legal operators aren’t always incentivized to offer them unless it’s a competitive marketplace. And in Illinois, which has an abundance of operators, players have been bombarded with one promotion after another.

“During September, especially, there was a ton of free money being handed out by the likes of DraftKings, FanDuel, PointsBet and BetRivers,” Joe Boozell of PlayIllinois said. “And even now, these books will email attractive offers pretty regularly.

“There’s a ton of competition here for users, and I think that ultimately benefits the user. I also think users appreciate stuff like this, and they are more inclined to keep using legal books going forward as opposed to reverting back offshore.”

Tennessee, which launched its market last month, has seen a similar influx of offers.

“These sportsbooks are working to secure their share of the market and strengthen customer loyalty,” said Alec Cunningham of PlayTenn. “In return, bettors are reaping the rewards.”

The Virginia Lottery will issue a minimum of four and a maximum of 12 sports betting licenses, which bodes well for sportsbook promotional offers in VA.

Don’t forget the brick-and-mortar sportsbooks

At least initially, all of Virginia’s sportsbooks will operate online.

However, Virginia casinos will begin opening in 2022 and 2023. When they do, they can open brick-and-mortar sportsbooks. The same goes for NASCAR racetracks. So, too, can any professional sports teams that relocate to Virginia, including the Washington Football Team.

Although online sports betting will likely account for the bulk of wagering in Virginia, there’s something to be said for a touch of the old school.

“Pretty much all of the casinos in PA have upped their brick-and-mortar sportsbook game,” said Katie Kohler of PlayPennsylvania. “What started as a makeshift spot, is now, in many cases, a state-of-the-art sportsbook.”

Sports bettors will probably always look to Las Vegas as the epicenter of sports betting. Even if the state doesn’t do the biggest monthly handle, the sights and sounds of Sin City are synonymous with sports betting. Having a physical sports betting presence is a big reason why.

“The best aspect of covering sports betting in Nevada is the tradition and the people,” said Marc Meltzer of PlayNevada. “The classic sportsbooks like Westgate, Mirage and now Circa can’t be matched by any other state. Along those lines, the staffs at these sportsbooks are willing to speak about their offerings from odds/lines to the actual experience visiting their property.”