Last updated: August 14, 2024
Senators Catherine Cortez Masto and Cindy Hyde-Smith have introduced the WAGER Act, aiming to repeal the 0.25% federal excise tax on sports betting. The American Gaming Association supports the bill, arguing that the tax stifles industry growth and competitiveness. The challenge lies in justifying the loss of $299.6 million in annual tax revenue.
Since the sports betting industry in the United States is actively growing, legislators are trying to adapt to the rapidly changing situation. Businesses are evolving new business strategies.
For instance, recently, DraftKings decided to implement a surcharge on net winnings. Therefore, there is a bill at the Federal level to address the concerns of the industry.
Nevada Senator Catherine Cortez Masto and Mississippi Senator Cindy Hyde-Smith brought the latest legislation attempt to the field. They have come up with the WAGER Act, a bill whose main purpose is to repeal the federal sports betting excise tax.
This 0. A 25% tax on the sports betting handle has been considered a negative factor against the development of the sports betting market, the stagnation of competition from offshore and black market companies, and a reduction in employment.
The tax has been in existence for a very long time, and this is not the first move to try to do away with it.
In the previous year, Guy Reschenthaler, the Republican representative of Pennsylvania’s 14th congressional district, and Dina Titus, the Democratic representative of Nevada’s 1st congressional district, both members of the US House of Representatives, filed a related preposition to repeal the old law that called for 70 years.
For a long time now, many industry analysts have opined that the tax has become unbeneficial and should be abolished to foster the required growth within today’s advanced administrative environment.
The anti-bonafide sports betting tax instituted by the federal government has been a backup of the American Gaming Association and has supported the latest legislation aimed at abolishing the tax.
The AGA has supported the prior draft law by members of the Reschenthaler-Titus group and the new WAGER Act proposed by Senators Catherine Cortez Masto and Cindy Hyde-Smith.
AGA CEO Bill Miller saw this initiative as a positive sign, which was required to bring the regulation of the sports betting industry up to date.
In the statement, Miller argues that the senators are dedicated to establishing a legal and responsible sports betting market to deter users from engaging in unsafe, illegal markets that lack consumer protection and appeal to bad actors and tax avoidance individuals.
Miller ensured that with the help of policymakers, the AGA would persistently work towards the total eradication of this unprofitable tax.
Despite the AGA’s support, the repeal of the excise tax faces challenges, particularly in demonstrating the economic benefits of its removal. The tax, which is 0.25% of the sports betting handle, generates significant revenue based on the total amount wagered by consumers.
Convincing lawmakers to forgo this revenue stream will require strong evidence that the benefits of eliminating the tax outweigh the potential financial losses.
For the year 2023, the estimated handle of the sports betting scenario in the United States was $119. 8 billion in handle has generated roughly $299 billion for the global economy. 6 million was collected from the 0 angel investors who contributed during the first and second round funding. 25% federal excise tax.
This fair revenue base is perhaps something that the government may not that easily let go of. Nonetheless, the business in the sector is experiencing a pinch in its pocket and has hence pushed the need for change.
One of the strains of this type is the one recently experienced by DraftKings when the company introduced a players’ net winnings surcharge. This measure was declared by the company, which is one of the leaders in the American sports betting sector, due to the current competition and high taxation in many states.
Nevertheless, this view has caused a lot of controversy, but the action proves the high level of competition in the field. While DraftKings is active in most of the 40 states with a legal sports betting market, they see great value in abolishing the excise tax, especially for high-tax states such as New York.
Like New York, there was a great deal of movement in sports betting across the country in the first half of 2024. New York’s sports betting handle in 2024 was 11.03 billion, and a figure operator has to get through a 51% tax on their earned income from the providing service.
For the lawmakers and industry stakeholders shouting the high-pitched note for its repeal, the task is to convince that while scrapping the new excise tax will significantly hurt the state revenues – it will not be to the tune of $294.8 million annually.
Advocates recommend removing the tax because it could stimulate the flow of money in the economy even more and level the legal betting sphere against offshore and illicit actors.
