States might turn to legalized gambling with budgets rocked by coronavirus

The coronavirus pandemic could lead to a quicker expansion of sports betting and internet gambling in the US as states deal with huge budget deficits and look for new tax revenue wherever they can find it.

Most major sports remain shut down due to the virus, but European soccer and Asian baseball have begun play, NASCAR is racing again and PGA Tour golf restarts in two weeks. Major US sports leagues including the NBA and NHL are making plans for resuming their seasons.

The virus “will accelerate the expansion of sports betting and online casinos in the next 12 to 24 months,” said Chris Krafcik, a managing director with Eilers & Krejcik Gaming, which tracks sports and internet betting legislation in the US. “Both activities provide states, whose economies have been massively disrupted by the outbreak, the opportunity to capture new revenue immediately in the form of upfront license fees, and over time through taxes.”

Sports betting is not a golden goose for states seeking new tax revenue. An Associated Press analysis last year found that taxes on sports betting would generate just a fraction of 1 percent of most states’ budgets if they met their estimates — and many states fell far short of those projections.

But with many state budgets now resembling smoking craters in the ground as tax revenue disappears in a largely idled economy, even a small revenue boost is better than none.

So far, 18 US states plus the District of Columbia offer sports betting, and four offer internet gambling, which can include online casino games, slots and poker.

In addition, Virginia and Tennessee have approved sports betting but have yet to launch. North Carolina allows two tribal casinos to offer it, and is considering a bill to allow it statewide.

Washington state allows sports betting at tribal casinos once regulations are in place, and Oklahoma allowed two tribes to do so, pending approval from federal authorities.

Louisiana, Massachusetts and Ohio are realistic candidates to legalize sports betting this year, Krafcik said.

Louisiana is close to approving a November referendum on sports betting, and Ohio’s Legislature is moving forward this week with a bill that could authorize sports betting, including mobile betting, although a competing measure could limit it to in-person bets at casinos and race tracks.

On Thursday, legislators in California promoted sports betting as a way to help a state budget facing a $54 billion deficit. The nation’s largest state is considering a November referendum on the topic.

Krafcik said Illinois could approve internet gambling by the end of the year, at least in part to recoup tax revenue lost to the virus outbreak.

“States are facing unprecedented financial challenges,” said Matt King, CEO of FanDuel Group. “We are firm believers that mobile sports betting and online gaming legislation will be the type of commonsense legislation that states will look to when legislatures return.”

New York state Sen. Joseph Addabbo has been pushing his state to adopt mobile and online sports betting as a way to generate new revenue, including recapturing money from gamblers crossing the border into New Jersey to bet on sports. He said his state faces a budget deficit of up to $17 billion, “largely because of the virus.” Other estimates have placed the shortfall around $13 billion.

“We should be preparing now — creating regulations, lining up vendors, setting up servers,” said Addabbo, a Democrat. “Let’s get it ready so that when we come back, we don’t miss another Super Bowl.”

New York Gov. Andrew Cuomo, also a Democrat, maintains that approving mobile sports betting would require amending the state’s constitution.

While casinos in many states are moving to reopen, including Nevada next week, not all gamblers will be anxious to race back into crowded, enclosed buildings with the virus still spreading.

“If social distancing safeguards remain in place, it is possible that some gamblers would prefer to play from home rather than going into a casino,” said David Schwartz, a gambling historian with the University of Nevada Las Vegas.

Yaniv Sherman, head of commercial development for the online gambling company 888 Holdings, said the virus is accelerating trends that were already in motion before the virus hit, including growing acceptance of sports and online betting.

“The virus has highlighted the need for revenue diversification,” he said. “The future is around online growth, and it’s right now, not in 5 or 10 years. We hope to get additional states on board.”