Overview: Online Sports Betting In Virginia
Virginia is set to start online sports betting at the beginning of 2021. Like Michigan, Virginia has taken several months to get its sports betting industry completely live. However, Virginia’s sports betting industry will resemble Tennessee’s and become the second state to have its entire sports betting industry online. Unlike Tennessee, however, its first casinos won’t start construction until 2021 – and won’t be open until much later.
Until then, here’s what we know about Virginia’s sports betting industry.
How Sports Betting Made It To Virginia
Sports betting came to Virginia after brief negotiations between Governor Ralph Northam and the Virginia General Assembly. The General Assembly sent a bill to the Governor’s desk that would legalize sports betting and allow Virginia to build five casinos. However, Governor Northam wanted to attach a few amendments to the bill. Most of his changes moved fees around and amended licensing timelines. But the biggest change was excluding NCAA bets featuring Virginia teams.
The original bill banned betting on all college and youth sports. However, Governor Northam seems to have wanted to cash in on NCAA games. He also seems to have balanced protecting Virginian college athletes against NCAA games’ popularity. The pandemic lockdowns may have nudged Governor Northam to expand sports betting opportunities. Governors have budgets to balance, after all. The pandemic was not a time to reject money. Governor Northam sent the bill back to the Assembly, and they accepted the bill with his changes. On April 22, 2020, sports betting became legal in Virginia.
But the Virginia Lottery had its work cut out for it. Its job was to create guidelines for Virginian sportsbooks to follow. Some sources project it to be finished in January 2021. That will set Virginia up to take advantage of the next sports season after COVID-19 vaccinations.
How Much Money Virginia Sports Betting Could Make
Virginia probably wouldn’t legalize sports betting if it didn’t stand to profit from it. Virginia’s Joint Legislative Audit & Review Commission (JLARC) projected that Virginia’s sports betting market could generate $55 million in annual tax revenue at maturity. (Expect a fraction of that when it first comes out.) If that sounds low, don’t worry. It’s because many sites throw out the $412 million estimate in gaming revenue.
Gaming revenue is how much money sportsbooks keep after they pay bettors their winnings. However, that’s not the amount taxed, either. Sportsbooks still have to take out promotions and the 0.25% federal excise tax. When Virginia sportsbooks go live, online sports betting revenue will likely be low for two reasons. First, the industry will be in its infancy. It’ll take time for sportsbooks to get customers.
Second, sportsbooks will probably spend a lot of money on promotions. They’ll offer deposit bonuses and risk-free bets to win customers over early. Those are all different ways for bettors to use free credits on some of their wagers. But those free credits cost sportsbooks money. They cut into sportsbooks’ bottom lines and reduce the amount of taxes they pay. Bettors should take the first year of revenue numbers with a grain of salt.
And pay attention to which numbers are sportsbook revenue and tax revenue.
Where Do Virginia Sports Betting Taxes Go?
Many states direct gambling taxes to education. Virginia is no exception. All of its lottery revenue goes to education. However, that doesn’t mean that all its gambling revenue goes to education.
But sports betting is in a category all its own. Sports betting goes to Virginia’s general fund. The general fund was 36.1% of Virginia’s budget from 2018-2020. It’s $42.6 billion made up of different types of taxes:
|Type of Tax||Percentage of General Fund|
|Individual & Corporate Income Tax||75.0%|
Taxes on sports betting revenues will make up a tiny portion of Virginia’s budget. That’s going to make all the funds collected from Virginia sports betting – both retail and online – less effective. The best way to use small amounts of tax dollars is to invest them into specific projects. For example, Colorado earmarks its sports betting tax dollars like this:
|Tax Destination||Amount of Tax|
|Division of Gaming Administrative Costs||All Administrative Costs|
|Hold Harmless Fund||6% Sports Betting Taxes|
|Gambling Hotline & Counseling Services||$130,000|
|Water Plan Implementation Cash Fund||Whatever’s Leftover|
With a revenue plan like this, Colorado can make even a few hundred thousand dollars go a long way. In contrast, Virginia is creating an industry that’ll add one-quarter of one percent more money to a third of its budget. It’s marginally better than nothing, but it’s hard to identify what economic benefit those tax dollars will produce. Those tax dollars may be used well or not. But it’ll be hard to judge since sports betting taxes will be a drop in the ocean in Virginia’s budget.
Virginia Sports Betting
There’s a lot for bettors to look forward to in Virginia’s sports betting market. It’ll begin completely online, then have retail options once Virginia’s new casinos are built. Bettors won’t be able to wager on college games with Virginian teams – or place any prop bets on college teams. But other college games will be open for betting. Virginia can expect a profitable sports betting industry, but it’ll take time to grow. Virginia’s sports betting tax revenues won’t make a difference in the state budget, either. However, Virginians can still see economic benefits. Any jobs that sports betting creates will benefit Virginians infinitely more than the tax dollars. We’ll see how much Virginian sports betting touches the Commonwealth’s lives. But before it goes live, you can read up on how to place sports bets and prepare for Virginia’s sports betting launch.