Is the US licensing model bad for all?

How does the lack of a nationwide concept affect operators, affiliates and ultimately, bettors?

The 14 of May 2018 was a big day for the sports betting industry in the United States. Before then, the sports betting aficionados could only place single-game wagers in Nevada.

Nevertheless, the Supreme Court struck down the Professional Amateur Sports Protection Act (PASPA), handling the legislative keys for all other states to embrace sports betting.

Delaware was the first to react, as they began allowing single bets as of 5 June. New Jersey took its maiden sports bet just nine days later.

Since then, the number of states that have legalised at least some form of sports betting has grown rapidly. Currently, the residents of 23 American states can place sports bets.

The PASPA repeal opened up an abundance of opportunities for sports betting operators. As a result, we've seen British and worldwide giants such as Bet365 and William Hill entering the unexplored and opportunistic new market.

US gambling market constantly expanding

The level of competition is high, especially when adding the most popular American sportsbooks to the story. The sheer size of the industry can be observed by having a look at the list of sports betting operators that are currently available across the United States. 

There are numerous sites, such as BettingBilly.com, which provide the full list of the sportsbooks available in each of the states, which have legalised sports betting till now.

The aforementioned PASPA repeal has significantly changed the whole ecosystem, as bettors finally have the opportunity to move away from shady offshore betting sites.

Everything is better when there's both a legal competition and a legal industry. However, offshore betting sites are still present in the niche market. 

Why would a person risk his money at an offshore site when they have the option to place their money with a safe and legal online betting operator. The answer namely lies in regulations, licenses and taxes.

High costs in specific states affect the odds

Firstly, it's important to note that each state has the option to determine their own sports betting laws. This is the inaugural hit to the ambitions of widely popular sports betting operators to take full advantage of the American market. This is also the reason as to why some sportsbooks are only available in certain states.

The distinction between licensing fees for operators in different states is not exactly standard. To gain a sports betting license in Pennsylvania, an operator must pay a fee of $10,000,000. Once the 34% state tax and the extra 5% federal tax are added, it seems as though the requirements can hardly be met by any. 

The operator must then increase its cut through the odds. That is where the final consumer, also known as the bettors, feel the consequences. Hence why some bettors may opt to stick to offshore sites, where they would receive more attractive incentives and better prices.

The lack of a nationwide concept

To get rid of illegal competition, the difference between fees and taxes across states must be reduced. For instance, the Nevada sportsbooks only need to pay 6.7% tax for the sports betting revenue. The majority of states, are between 8 and 10%. 

On the other hand, there are others with huge rates, such as Pennsylvania, or with revenue-sharing models such as Rhode Island or Delaware. The latter state receives at least 50% of the sports betting profit. 

It's not difficult to understand the operators and affiliates who are reluctant to even think of exploring such markets. At the end of the day, it is the bettors who stand to lose. Even if a sportsbook gets a license in a state with large taxes, it will never be in a position to remain on the competitive market with its niche market rivals. Until this is changed, bettors are likely to continue taking advantage of better odds at offshore betting sites.

The key, undoubtedly, lies in a unique nationwide concept.

More in Sponsored