When it comes to sports betting revenue, borders prove more porous than planned.
The first states that legalized sports betting after the senate ruling in 2018, would have done so with the potential revenue in mind. What they did not expect was that by allowing online sports betting to be traced by 1your IP address, they would actually pick-up additional bettors living just across state lines.
It’s a phenomenon that is occurring more often as new states legalize online sports betting. The most obvious case is the situation in NJ. The state has seen a huge spike in single male NY residents traveling to NJ in the evenings and weekends to place bets on their smartphones.
As FanDuel provides one of the best welcome offers in the state, they have proven the sportsbook of choice for these punters. The sportsbook estimates that 22% of its revenue through its NJ sports betting app comes from New Yorkers. It is not just the long list of NJ sportsbooks that are benefiting from their proximity to the Big Apple but it is also the numerous sports bars located near the train and bus stations.
This effect is pushing some states to reconsider their stance on sports betting. Maryland had initially resisted a bill to legalize sports betting but they now face themselves almost entirely surrounded by states that have in West Virginia, Pennsylvania and New Jersey. The state is undoubtedly losing potential revenue to its neighbors. They could, in turn, win this back if they were to legalize online sports betting, as residents of Washington could simply walk over state lines and bet in Maryland instead.
The smaller size of the East Coast states makes them particularly vulnerable to this form of state competition. However, some of the larger, more sparsely populated states have also put pressure on their neighbors. Indiana, for example, is home to suburbs of Chicago, Louisville, and Cincinnati. With an expansion of sportsbooks looming in Indiana, the gaming commissions in Ohio, Kentucky, and Illinois will be concerned.
This type of effect will only occur in states that have fully legalized online gambling. California, for example, will not feel any pressure from Nevada as the Silver State still requires in-person sign-up, depositing, and withdrawal.
DraftKings recently launched in New Hampshire which will put pressure on Vermont, Massachusetts, and Maine.
Kansas state could potentially be the biggest loser, however, as Missouri is expected to finally sign a bill legalizing online gambling in the state. Kansas City straddles the Kansas State and Missouri and is home to an NFL, MLB and MLS team. The possibility of losing a significant amount of potential revenue to its neighbors will no doubt shape the state’s position on sports betting in the future.
A popular method for the state to persuade voters to pass a bill is to commit a percentage, or all, of the potential revenue from taxing sportsbooks, to a worthy cause. Colorado, for example, has committed to investing the extra cash in a ‘water plan’.
