Texas Could Generate $30 Billion In Sports Bets In Year One

Written By Tyler Andrews on January 10, 2023 - Last Updated on April 17, 2023
large texas flag large texas sports betting market

Legal sports betting in Texas could generate upwards of $30 billion in bets and $2 billion in gross gaming revenue in its first full year, according to a PlayTexas analysis. 

Reaching those benchmarks would make Texas the highest-grossing market in the country, surpassing New York. Due to the state’s predilection for low taxes, though, tax revenue likely won’t outpace the Empire State.

These figures represent a rough estimation based on data drawn from other national markets. However, with such a large and sports-crazed populace primed for legal sports betting, Texas is unique.

range chart texas sports betting handle projections

Two models influence our projection

Our projection is based on two different models that consider differences in tax rate, promotional deductions and the likelihood of retail casinos with sportsbooks.

We acknowledge that current and former sports betting legislation in Texas has proposed 10% tax rates for retail and online betting. Our projection looks at slightly higher rates as we consider the 10% rate a starting point for negotiations.

UPDATE: Online-only sports betting legislation filed by Sen. Lois Kolkhorst, D-Brenham, and Rep. Jeff Leach (R-Plano) sets a flat 10% tax rate and makes allowances for promotional deductions. PlayTexas still sees these details as up for debate and maintains the following projection.

Model 1: Retail and online sports betting, 15% tax rate, no promo deductions

Based on moves made by states such as Colorado and Virginia to curb the amount of lost revenue to promotional deductions, we consider this model as an evolved position. Where promo deductions previously were deducted from gross gaming revenue (GGR), operators could avoid paying most, if not all, taxes in some portions of a year. To compensate operators for this loss in tax deductions, PlayTexas proposes a lower tax rate: 15%

PlayTexas also accounts for current casino legislation that calls for four resort casinos in four metro areas: Dallas, Austin, Houston and San Antonio. Along with retail sports betting on offer in those resort casinos, Texas racinos likely would have sports betting on offer. 

In this model, PlayTexas estimates that sports betting could generate tax revenue in the range of $210 million-$350 million per year.

range chart texas sports betting revenue projections

Model 2: Retail and online sports betting, 25% tax rate, promo deductions allowed

In this model, PlayTexas considers the same resort casino makeup, but a higher tax rate as compensation to the state for operators receiving some amount of promo deductions to attract new customers. 

“Typically, these promo deductions account for 40%-50% of overall GGR or 2%-4% of total handle in markets which provide enough data to decipher it,” PlayTexas analyst Eric Ramsey said.

This data makes the 10% increase in tax rate relatively slight by comparison. That said, Texas could opt for an even higher tax rate to further offset deductions. In this way, it could model a state such as Pennsylvania, which allows promo deductions but taxes sports betting at 36%. Texas could even model New York, which taxes sports betting at a whopping 51%

As mentioned above, though, these scenarios are highly unlikely because of Texas’ notoriously tax-averse population. So, we land on 25% as the higher rate.

In this model, PlayTexas estimates sports betting tax revenue in the range of $240 million-$360 million per year.

range chart texas sports betting state tax projections

Determining Texas sports betting handle projection

Our first indicator in projecting handle is a per capita index of other comparable states. 

Ramsey said that “based on this index, handle averages for Texas range between $620-$900, depending on the model.” This positions Texas alongside New York ($801), Arizona ($867), Colorado ($888) and, on the high end, New Jersey ($1,180).

The volume of bettable sports in the state also is considered. In Texas, this is high, especially when taking into account college sports. While collegiate betting could be negotiated on or off the table, that still leaves 13 professional sports teams across the state.

With so much sports saturation comes a sports-crazed populace that already has been primed by the proximity of legal betting in neighboring states and through illegal offshore sportsbooks. PlayTexas previously discussed the latter with Cara Gustafson of the Sports Betting Alliance. 

Finally, PlayTexas considered the number of online operators in the state. Current legalization efforts in states such as Maryland, Massachusetts and Ohio have seen growing numbers of online operators receiving sports betting licenses. At last count, 46 licenses were granted in Ohio.

Texas could restrict the market significantly and allow only 5-10 operators in the state, but that seems unlikely. The projection is based on the likelihood of Texas opening the state to a high number of operators.

The projection accounts for retail and online sports betting, but assuming an online-only system would not shift the estimation much.

Likelihood of sports betting legislation reaching Texas ballot

A concerted effort on behalf of lobbyists to educate legislators on the perils of the offshore market has created an impetus for expanding legal gambling. PAC endorsements and campaign funding from pro-gaming groups such as the Sands PAC, have also resulted in softening positions from key government figures, such as Gov. Greg Abbott

However, staunch opposition from social conservatives and Lt. Gov. Dan Patrick have created doubt that sports betting can cross the finish line.

Due to these factors, PlayTexas sees long odds for sports betting legislation making it through the Texas Legislature in 2023. 

Tyler Andrews Avatar
Written by
Tyler Andrews

Tyler is the Managing Editor for PlayTexas, covering sports, sports law and gambling for the Lone Star State. He has also covered similar topics for a number of Catena Media's regional sites including NCSharp, PlayCA, PlayFL, PlayOhio, and PlayMA. Tyler is a Texas resident and currently specializes in covering gambling legislation and news in emerging US markets.

View all posts by Tyler Andrews