Among the top-line sports wagering numbers the revenue report Friday, the one that stood out the most was the $7.8 million in promotional deductions reported by operators.
It was more than 10 times the mobile operators in the Old Dominion would be able to count promotional deductions against their gross revenue.
The budget amendment that ed ahead of the 2023 fiscal year banned mobile books from deducting promotional credits if they had been operating in the state for more than 12 months.
The mystery was revealed when the public records department of the Virginia Lottery on Tuesday fulfilled a Freedom of Information Act request from Sports Handle. The overwhelming majority of the $7.8 million figure — 96% of that amount — originated with bet365 during its first full month of operation in the state.
Why promotional deductions matter 212h23
Running Top 10 #SportsBetting handle for February by state:
1 New York $1.47B
2 New Jersey $847.4M
3 Nevada $659.4M
4 Ohio $639.8M
5 Pennsylvania $599.5M
6 VIRGINIA $433.8M <-NEW
7 Colorado $425.1M
8 Michigan $357.2M
9 Indiana $356.2M
10 Maryland $339.4M— Chris Altruda (@AlTruda73) April 5, 2023
Promotional spend in the Old Dominion is a touchy subject. Momentum currently sides with state government, as that budget amendment ed for the current fiscal year has created a sizable difference in state tax revenue. Receipts for the first nine months have totaled more than $47.6 million, compared to the $35.5 million Virginia received in its first 17 months of wagering.
The rise in tax revenue comes with the expected drop in promotional credits allowed for deductions. The big three of FanDuel, DraftKings, and BetMGM averaged $10.1 million in monthly promotional deductions in the six months before the budget amendment was ed, with BetMGM averaging $4.6 million on its own. With Virginia’s 15% tax rate on sports wagering, the state gave up over $9 million in tax revenue from those three operators alone the first half of 2022.
By any standard, even with a month that allows operators the opportunity to lavish promotional offers with the Super Bowl in February, bet365’s spend in Virginia was notable. Excluding a four-month period from July-October 2021 when Sports Handle was not able to expeditiously obtain figures via FOIA requests from the Virginia Lottery, bet365’s $7.5 million in promotional credits deducted is the highest monthly total in the history of the state.
Only five other operators — BetMGM ($6.2 million), FanDuel ($5.4 million), DraftKings ($3.6 million), PointsBet ($1.1 million) — claimed seven-figure promotional deductions in any month of wagering in Virginia in the 22 months of available figures. The question for bet365 is whether it can convert this spend into customer acquisition.
The promotional deductions helped swing bet365’s gross gaming revenue to a negative adjusted gross revenue of nearly $2.7 million. The sportsbook paid nothing in state taxes despite reporting $5.3 million in gross revenue thanks to an eye-watering 33.9% hold on $15.6 million handle. When including its first full month of wagering in January, bet365 has an overall negative AGR of nearly $3 million, a figure that may be slow to decline depending on operator performance and bet365’s willingness to continue to spend in Virginia.
Bet365’s strategy, though, may have to do with making its long-awaited splash in the U.S. market in 2023. The other three states in which bet365 has launched — Ohio — are in the top 10 nationally for handle. It has already lavished $25.6 million in promotional spend in the first two months of wagering in Ohio, nearly double the $13 million in adjusted gross revenue generated on the strength of an 18.6% win rate.
Ohio may carry more risk for bet365 though, as it cannot deduct any promotional credits through 2026. The simultaneous launch there, however, may be more conducive to bet365 flooding the market — its $69.6 million handle ranks fifth overall and is within $4.4 million of Barstool Sportsbook for fourth in Ohio. And its $15.6 million handle for February represented 3.6% of Virginia’s $433.8 million in accepted wagers.
Elsewhere in the state 5y196d
All-time Top 10 #SportsBetting handles post-PASPA (Feb in CAPS)
1 NEW JERSEY $35.7B
2 NEVADA $31.1B
3 PENNSYLVANIA $20.3B
4 NEW YORK $19.9B
5 Illinois $18.7B
6 INDIANA $11.3B
7 COLORADO $11.2B <-NEW
8 MICHIGAN $9.8B
9 VIRGINIA $9.1B
10 Arizona $8.4B#GamblingTwitter— Chris Altruda (@AlTruda73) April 3, 2023
FanDuel maintained its iron grip on the No. 1 spots for gross revenue and handle in Virginia, extending its run of months with at least $20 million in the former category to six with $20.4 million. The online titan also had its eighth consecutive month with a double-digit hold, landing at 11.6% for February from a handle of $176.4 million.
DraftKings also reached nine figures for handle, totaling $116.6 million. It had a 6.3% win rate, resulting in more than $7.3 million in gross revenue. BetMGM rounded out the top three in both categories, but its 6.8% win rate was its lowest in the last 17 months of known figures, as it claimed just over $4 million in gross revenue from $59 million handle.
Caesars claimed $1.4 million in gross revenue and was the only other mobile operator to reach seven figures. Hard Rock‘s retail location in Bristol paid out $102,111 on top of its $1.2 million handle.
