North Carolina will charge all online sports betting operators a $1 million licensing fee renewable every five years, which is less than one-third the cost operators pay in Tennessee for a similar five-year period.
In terms of other comparable states, North Carolina’s operating costs are relatively moderate and well below some of the highest-priced states in the country.
The North Carolina Lottery Commission (NCLC), an arm of the North Carolina Education Lottery, has from Jan. 8, 2024, to June 14, 2024, to launch online sports betting in North Carolina.
Operators to pay $1 million license fee for five years
The new sports betting law authorizes the NCLC to issue up to 12 interactive sports wagering licenses to online operators. In addition, the state’s two federally-recognized Native American tribes, whose tribal-state compacts already allow in-person retail sports betting, can each receive an online sports betting license as well, bringing the total number of potential online sites to 14.
While the tribes need not pay a new licensing fee when applying for their online licenses, the new commercial operators coming to NC must each submit a $1 million interactive sports wagering license fee with their application. The license is good for five years, after which it can be renewed for another five years, again for $1 million.
Once the sites launch, the state will receive an 18% tax on gross gaming wagers.
Comparing neighbors: Less than Tennessee, more than Virginia
The collecting of licensing fees will represent an initial, up-front boost to the state when it comes to sports betting revenue. How does NC’s $1 million interactive sports licensing fee compare with what other states require of online operators?
Looking at North Carolina’s neighbors with legal sports betting, Tennessee legalized online-only sports betting in 2019 and launched its first sites in late 2020. Operators in Tennessee must pay an annual fee of $750,000, meaning over the course of five years an online sports betting license costs $3.75 million to maintain.
That’s $2.75 million more than a comparable license in North Carolina.
Meanwhile, Virginia legalized online and retail sports betting in 2020 and launched in early 2021. There, an interactive online sports licensing fee costs $250,000 and is good for three years, after which operators can renew for an additional three-year term for $200,000.
That comes in well below NC’s $1 million fee. However, applicants in Virginia must also pay an additional $50,000 background check fee per “principal” (e.g., owner or executive, or anyone in management) that might sometimes push the overall cost closer to what North Carolina operators face.
Other comparables: More than Michigan, less than Ohio
Michigan and Ohio represent potential comparables for NC sports betting, given those states’ similar populations. North Carolina’s population is around 10.7 million, while Michigan has just over 10 million residents and Ohio has about 11.7 million.
Michigan charges new operators $150,000 ($100,000 license fee and $50,000 application fee), then $50,000 annually to renew. That totals $350,000 for the first five years, just over a third of what NC operators will pay.
By contrast, Ohio is collecting more from interactive online sports licensing fees. The fees vary depending on the proprietor and whether they contract with one or two mobile service providers (i.e., operate one or two online “skins”).
Professional sports teams with just one online skin must pay $1.15 million over the first five years. If a team has two skins, the five-year cost totals $3.48 million. For other applicants (i.e., the casinos and racinos), the five-year cost is $1.65 million for one skin and $5.15 million for two.
How does NC compare nationally?
Some states, such as Kansas, require no fees at all beyond the cost of background checks. Others have relatively small fees, such as Colorado (just $2,000 initially). Many states’ fees, though, are between $100,000 to $250,000.
Then there are the states that have gone the opposite route, charging sky-high licensing fees to create a major influx of cash, particularly at the start. Illinois, for example, has a $20 million initial fee, with a $1 million renewal every four years. New York charges a one-time $25 million fee, with legislation being floated to double that fee for new operators. Pennsylvania requires a $10 million initial fee but then just $250,000 every five years.
With such a disparity in fees, a true mean is not very useful. However, when looking across the country, North Carolina’s licensing fees land somewhere in the middle.
After collecting $1 million each from licensees and by not giving tax writeoffs to online operators for the purpose of promotional deductions, North Carolina will see a modest revenue bump in the early going though nothing like what these latter states enjoyed.