Report: Sports betting in Indiana could be $250M business, creating jobs and tax revenue

Regulated sports betting in Indiana could generate hundreds of millions of dollars in revenue annually for gaming operators, according to a report ordered by the Indiana Gaming Commission that was released Friday.

The state would see a direct benefit from sports betting as well: as much as $148.1 million during the first five years from tax revenue, license fees and other sources.

The report from Eilers & Krejcik Gaming, a California-based market research firm specializing in gaming and sports betting, analyzed what regulated sports betting could mean in Indiana and included research on how the issue has played out across the country.

The firm’s research found that if both in-person and mobile (i.e., online) sports betting were allowed, it would generate $56 million in revenue in the first year and that the total would grow to $256 million by the fifth year.

And that’s considered the “base case.” Annual revenue by the fifth year could range from $203.5 million to $339.5 million when considering the best- and worst-case scenarios.

"Revenue" is defined as the difference between the total amount wagered and the amount paid out in winnings. "Revenue" as such should not be considered operator profit, the report says.

But if only in-person sports betting is legalized, the revenue would be much lower, starting at $30 million in the first year and increasing to $102 million in the fifth year.

That’s because mobile sports betting would quickly be at least half the market. The report predicted it would be 57 percent of the market by the first year and 68 percent of the market by the fifth year.

“Broadly speaking, we believe that the value of Indiana's regulated sports betting market would be cut roughly in half in the absence of mobile,” authors of the report noted. “We further believe this deficit would accelerate over time as more and more demand shifts toward mobile.”

The calculations in the report were based on the performance of sports betting in other markets, the state’s current market for regulated gambling, current economic conditions, a survey conducted by Eilers & Krejcik Gaming and the regulations included in a previous bill authored by state Rep. Alan Morrison, R-Brazil.

Morrison’s bill, which was introduced during 2018 General Assembly, would have allowed the state’s 13 casinos to obtain licenses for sports gambling, and the casinos would have been able to offer in-person and mobile betting. The initial license would have been $75,000, along with $5,000 in annual administrative fees. Gross gaming revenue from sports betting would have been taxed at 9.25 percent.

The legislation did not move forward, but discussions resurfaced in May after the U.S. Supreme Court struck down a federal law that restricted gambling on football, baseball and most other sports games only to Nevada.

Morrison has said the legislation is likely to be re-introduced during the 2019 session. The interim Committee on Public Policy is scheduled to discuss the issue at its meeting today.

The report from Eilers & Krejcik Gaming also noted that the overall economic impact to the state would be significant from the start—estimating that the state would see a total of nearly $1.7 billion in direct and indirect economic impacts during the first five years.

After that, the annual economic impact would be $466 million.

Regulated sports betting could also directly create 729 full-time jobs by the fifth year, and an additional 1,552 indirect full-time jobs from vendors and suppliers.

The state would see a direct benefit as well: Under the best-case scenario, the report estimated that total state tax revenue from gross gaming revenue taxes, license fees and other various taxes, would be a total of $148.1 million during the first five years. Of that figure, about $89 million would be directly from taxing gaming revenue and charging license fees. The remainder would include individual and household taxes and taxes on gaming-related firms.

The report suggested that restricting betting from high school sports or minor league games would have a slightly negative impact, but prohibiting bets on collegiate sports “would likely have a disastrous impact.”

Morrison’s bill from 2018 did not specifically prohibit betting on any sporting events.

Several other states have already legalized sports betting since the Supreme Court decision in May, including New Jersey, Delaware, Mississippi and West Virginia. Pennsylvania and Rhode Island are expected to follow suit this year, and Eilers & Krejcik Gaming predict that it will grow to 33 states within five years.

All of Indiana’s neighboring states—Kentucky, Illinois, Michigan and Ohio—introduced legislation in 2018, and debate is expected to continue this year.

The report recommended that the Indiana General Assembly take action during the 2019 session, saying the risks of delaying it “clearly outweigh the rewards.”

The risks outlined in the report include allowing the black market to grow more, creating a competitive disadvantage for Indiana operators since neighboring states are expected to take action soon, causing economic loss for the state and complicating the legislative process because research has shown it tends to be easier to tackle sports gambling in non-election years.

The benefits to delaying action include being able to learn from other states, launching a stronger product from the start and providing more time to clarify policy details.