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Two new proposals have recently emerged in the sports betting market in United States, bringing the number of licensed sports betting houses to four. Still, the number is very small compared to other European countries, but not everyone understands why.
legislation is disappointing
Before there was a regulated market, there was nothing. Or rather, there was a gap in the law, which didn't even say expressly that online betting was legal, nor did it forbid it. What happened at this stage was simple: the international operators, based mostly in Europe, offered games to the USA, without needing a specific license from the USA State for this (because there was no license).
As it is easy to imagine, these companies paid taxes in their countries of origin and not in United States, and as such, the State decided, after a long time, to regulate the activity and demand a specific license from operators interested in exploring the local online game.
Gamblers and traders expected legislation similar to some success stories spread across Europe, for example England. But actually what happened was precisely the opposite. What was created was something that goes against the whole logic of the market, forcing licensed companies to practice absurd margins or make losses.
loss tax? Yes, it is possible
The situation is complex, but let's just take the example of sports betting at odds. First of all, it is important to mention that the scoreboard, being a territorially based game, benefits from a different regime than what we are going to explain.
As for online houses, they pay tax on any and all bets that are placed, whether it wins or not. This tax varies between 8% and 16%, and in the case of the two largest national houses, the value easily reaches the maximum ceiling.
At first sight it seems fair to pay for everything that is transacted, but in the case of betting, what is at stake is not a good or service, but a specific activity that can provide profit or loss.
For a better understanding, imagine that you place a bet of $100, with odds of 2.00, in one of the houses that pay 16% tax. If your bet is a loser, the house will keep your $100 and will pay $16 gaming tax. But if it wins, the house will have a loss of $100 (its profit) and will still have to pay another $16 in tax to the State.
It's easy to see that something doesn't go right. Obviously, the fair would be for the house to pay tax on the profit it had in each market. That is, at the end of each game or event, the amount received in bets would be calculated and the amount paid in prizes would be subtracted. If this value were positive, the house would pay tax on this profit. If, on the contrary, it was negative, this would mean that there was a loss, that is, there would be no tax to pay.
Traditional Gambling vs Sports Betting
Some advocates of this legislation (mostly politicians without technical knowledge) argue that traditional gambling also pays tax on any bet you make, which is true. The problem is that there are few points in common between a game like EuroMillions and a sports bet. In a lottery it is technically impossible to have a loss, as a percentage of the prizes is taken from the amount received and the remainder is profit or tax. In sports betting, however, the payment of the prize is uncertain, and is only decided by external factors over which the house has no control.
Betting in United States is good business?
It should be noted that bookmakers usually work with small margins. In international markets with healthy competition this margin is often less than 5% for each game. That is, of all the value the company receives in a given game, it pays 95% or more in prizes. This allows the site to offer competitive and fair odds for the bettor.
In United States it would be interesting for the same to happen, and theoretically it would be possible. But never with this legislation. Gambling tax on gross revenue forces houses to have very high profit margins, usually close to 10% in each market, but in some cases between 15 to 20%, so they can offset the unfair tax they have to pay. This means that the odds offered cannot be competitive.
On the other hand, competition forces companies to raise their odds so as not to lose customers, who in the long run realize that they are playing a game where they will never be able to make a profit.
Furthermore, there are numerous unlicensed sites to offer bets in United States (and throughout the world), and despite the legislator's effort to block some of them, this task is practically impossible, given the dynamic online. This parallel market manages to offer much better odds than those of national houses, since the tax paid by these companies is much lower than in the USA case, and in some cases they are even tax exemUS. As expected, a good number of bettors also end up looking for alternative solutions that offer fairer prices, despite the disadvantages in terms of safety and legality.
What profit do operators have?
For now it's not clear whether the first few months of legalized betting were profitable for online sites, but from what you hear, unofficially, there is widespread discontent with taxation. it couldn't be different. We have heard comments from a particular house that the business is unsustainable if the legislation is not changed. What is being demanded is that a company pays taxes, whether it makes a profit or loss. If, for example, after a year a site has received 10 million in bets and paid 11, it will still pay a good percentage of gaming tax.
This taxation is nothing new in Europe, it has already been applied in some other countries, such as France in 2009. The result, as expected, was not encouraging. And it is not a single case, but in all of them there is a common point: after a short time it was concluded that this way of paying taxes does not work, or at least does not take full advantage of the market.
It is for this reason that large international companies that previously operated in United States, such as Bet365, Ladbrokes, 888, Bwin and many others have not even asked for a license to offer betting. Because they can predict that they won't make a profit in these ways. bet365 has even commented on the matter, saying that only when the legislation is revised can it consider the possibility of returning to offer betting in United States.
The law can be changed?
Yes, and it is even planned that after two years of issuance of the first license there will be a review on the matter. But we don't see many signs that this will bring any important news. In the first report on online gambling in United States, the regulator's speech seems to be one of oUSimism about the market, even though the numbers show a sharp drop in activity in 2017. It seems strange to us that with the entry of new alternatives and with the knowledge of online gaming by more people, there is a negative trend. It remains to be hoped that it is only temporary.
Some "conspiracy theories" spread across the various online forums claim that everything is done in such a way as to keep little interest in the online aspect of the game, in order to benefit the activity of Santa Casa and the Placard. It is difficult to say to what extent vested interests can influence gambling legislation, but what is certain is that the entire process of licensing and creating specific legislation is carried out extremely slowly, and in some cases such as betting exchanges, there is a strange lack of information and constant postponement of all bureaucratic processes, without a single logical explanation for this. Whether it's incompetence, bureaucracy, or some factor outside the game itself, we can only imagine.
It pays to bet online?
Still, and for the recreational bettor, the USA market is relatively well. You just can't expect to make money in the long run, as this is a practically impossible task with the odds currently offered. For those who see online gaming as simple fun and are aware that they are most likely investing in something with no return, it turns out to be fun like any other. if it could be better? of course yes! There could be fair legislation, which would bring in more sites, which in turn would offer better odds, which would attract many more players, who in turn would place bets of much higher value, and in the end the State would only gain from this. Although we do not have a precise study on the potential taxes that could be collected, we can say with some margin of certainty that they would be much more than those currently received by the government.
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