Morgan Stanley analysts expect 42 jurisdictions in the US will have legalized and launched sports betting by 2025.
If past experience holds true, most of the US sports betting licenses yet to be issued will go to brick-and-mortar casinos — in large part because of their expertise, existing infrastructure, and state governments’ familiarity with the gaming industry.
Taxes on gross gaming revenue are also likely to be around 15%, analysts said in a 114-page report, US Sports Betting & Online Gambling Primer 3.0, which was released this month.
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Eight New States Expected to Launch by 2025
Morgan Stanley said its 42-jurisdiction forecast, which includes 41 states and the District of Columbia, was based on where analysts saw momentum in state legislatures.
Analysts said they expect Nebraska and Ohio, which legalized sports betting in 2021, will launch in 2022. Ohio is currently set to launch on January 1, 2023, while Nebraska’s launch date has not been announced.
The analysts predicted that four states – California, Kansas, Maine, and Missouri – would legalize sports betting in 2022 and launch in 2023, with the caveat that the California launch would be for retail sports betting only.
While the predictions for Maine and Kansas rang true, lawmakers in Missouri could not agree on legislation before adjourning on May 13. California voters will have two initiatives for legalizing sports betting on the ballot in November.
Arkansas and North Carolina are projected to expand to online sports betting in 2022, the firm said.
Morgan Stanley expects Georgia and Massachusetts will legalize sports betting in 2023 and launch the following year. The firm said Kentucky — which had a sports betting bill die in committee last month — and Oklahoma are likely to follow, with legalization in 2024 and a launch in 2025.
The firm said sports betting launches typically occur eight months after legalization.
The nine states not included in the forecast are Alabama, Alaska, Hawaii, Idaho, Minnesota, South Carolina, Texas, Utah, and Vermont.
Most Sports Betting Licenses Have Been Awarded to Casinos
While states are taking different approaches to legalize sports betting, Morgan Stanley said most have opted to award licenses to land-based casinos. Many states have allowed casinos to partner with online operators. The firm said the more recent legalizations “have generally been more open, giving licenses to sports teams and online operators.”
Of the 35 jurisdictions (34 states plus Washington DC) studied, casinos in 20 states were issued licenses. The state with the highest number of operators was Maryland with 60.
Four states — Indiana, Iowa, New Jersey, and West Virginia — allowed each casino to have three online skins. New York, which only allows online sports betting, had the highest licensing fee at $25 million.
To explain why some states have allowed casinos to operate sports betting, Morgan Stanley said casinos “employ many [people], are already regulated, pay taxes, and generally have support in state governments. Some casino operators already operate sportsbooks in other jurisdictions, so they have the infrastructure in place.”
Current Tax Rates Averaging 19%
Morgan Stanley found the average tax rate on gross gaming revenue across 31 jurisdictions was 19%. Four states — New Hampshire, New York, Oregon, and Rhode Island — were at the high end of the spectrum with tax rates of 51%, while Wisconsin had the lowest rate at 5%.
Lawmakers in 15 states where sports betting is considered pending have proposed tax rates that average 15%. Hawaii has proposed levying a 55% tax while Mississippi and Texas have both suggested a tax rate of 6%.
The firm added that initial gaming rates typically stick, in large part because the gaming industry “is typically a very high tax contributor for states, so they generally have political clout.”
Researchers found that there have been only eight times over the past two decades where states changed their gaming tax rates. Colorado, Iowa, and Michigan raised some tax rates while New York and South Dakota lowered some. Illinois did both for different situations.
