A new report finds legalizing sports gambling could boost revenue for states like Kansas, but any windfall is likely to be brief.
Sports gambling began to tempt lawmakers after a U.S. Supreme Court ruling legalized it earlier this year. The report from the Pew Charitable Trusts said it likely won’t be a magic pill to cure state budget issues.
Mary Murphy, one of the authors of the study, said tax collections from sports betting may not be new revenue. Rather, it’s likely to be money cannibalized from places such as casinos and the tax proceeds they generate. That’s based on past experiences when gambling has been expanded.
“States could experience short-lived gains followed by downward pressure on revenue as more and more states legalize,” she said.
Because there’s currently very little legal sports gambling, Murphy said it’s hard to estimate what the financial impact of sports betting could be. However, she said states shouldn’t count on a major bonanza.
“The revenue streams will likely be small,” she said.
That’s because sin taxes overall make up a small percentage of state revenues. The report found in Kansas they account for 3.3 percent and in Missouri it’s 4.9 percent. Those numbers include alcohol, tobacco and gambling taxes.
Kansas lawmakers considered bills this year that would have created a framework for sports betting, but they ultimately didn’t pursue legislation.
When the Supreme Court knocked down the federal ban on sports gambling, Republican Senate President Susan Wagle hailed the ruling as a victory for state’s rights.
“The legalization of sports betting will help diminish illegal gambling operations and allow states to bring their regulations into the 21 st century,” she said in a statement. “I am confident the Kansas Legislature will act appropriately to regulate sports betting next year.”
Marijuana is another issue on the minds of some state lawmakers. The Kansas Legislature, with a strong block of conservatives, seems unlikely to approve legalization. But the number of other states legalizing medical and even recreational marijuana has grown rapidly in recent years.
Murphy said neighboring Colorado has seen significant, although volatile, revenues from recreational marijuana. Monthly taxes and fees totaled around $2 million in early 2014 and were around $21 million in April 2017.
States that are early to the party may be able to cash in on tourism dollars as people visit to sample legal pot, but that buzz is likely to fade over time.
“As their neighbors … legalize recreational marijuana, the early adopters may see fewer tourism dollars,” Murphy said.