North Carolina could generate up to $7 billion in total bets in its first full year of online sports betting. That would result in $126 million in tax revenue to the state, according to NCSharp projections.
A year like that would put North Carolina in the top-five states nationally for betting. It would also set a benchmark for sports betting 30% higher than that projected by the state’s fiscal analysts who made their projection when preparing House Bill 347, the state’s online sports betting law.
“Now that the NFL season has kicked off, North Carolina’s online launch of sports betting is the next major event on the horizon for the industry,” NCSharp analyst Matt Schoch said. “Kentucky is launching sports betting this month. But with the population and sports culture in North Carolina, its 2024 launch will dramatically shape the industry next year and provide a great entertainment option and new funding crucial state programs.”
When online sports betting launches next year, tax revenue will help fund:
- Youth and collegiate sports
- Responsible gambling measures
- Outdoor engagement
- Major event attractions
The launch window for online sports betting in North Carolina is between Jan. 8 and June 14, 2024. Our projection, a range with a floor of $6 billion of bets in year one, could adjust as the pre-launch market shifts and regulators finalize key parameters in the coming months.
Virginia, Ohio shape NC sports betting handle projection
NCSharp reached its projection of total betting activity, called handle, by comparing the state’s sports betting framework to similar markets. It also analyzed the law’s impact on the business environment along with current sports betting market conditions.
Virginia, with 2 million fewer people and smaller population centers than North Carolina, provides a lower boundary.
Virginia’s college sports landscape lacks the intensity of North Carolina’s. Additionally, the sports betting law in Virginia does not allow for bets on in-state teams, which North Carolina’s does. On the pro sports side, Washington D.C.’s centralized teams may not attract as many fans in the western part of the state.
Plus, sports betting has gained steam nationally since the January 2021 Virginia launch. Even for currently-live states, 2023 is pacing over 2022 for national betting, as $55 billion was bet on sports in the first half of this year.
Ohio’s sports landscape is comparable to North Carolina’s but skews more toward pro sports where North Carolina skews college. The two states’ median annual incomes and annual disposable incomes are comparable with Ohio holding a slight edge in both.
The Buckeye State had momentum going into its Jan. 1 launch of sports betting this year thanks to its established casino and racino market. Through July, before football season started, Ohioans had placed more than $4 billion in sports bets.
North Carolina lacks a culture of legal gambling (outside the lottery and three remote casinos) that can compare to Ohio. We see Ohio setting the upper bound for what North Carolina could see in total handle.
Factors boosting NCSharp’s North Carolina sports betting handle projection
Our handle and tax revenue projection comes in well above the tax revenue projection of the fiscal note attached to North Carolina’s sports betting law.
The spring fiscal note states, “Fiscal Research assumed that total wagers from online and in-person betting would grow from approximately $3.9 billion in the first full year of operation to $6.6 billion in the third year of operation.”
We account for this discrepancy by looking at the following factors:
- The increasing popularity of high-risk parlay bets that will continue to entice bettors heading into the NFL season.
- Data that indicates that sports betting ad spending is up 8% from last year despite increased negative public sentiment around sports betting advertisements.
- The state’s fiscal note, written in May, that proposes a hold percentage of around 8.5%. This number comes in slightly above the national average for 2022 of 8.1% but well below the national average for this year to date–9.4%.
In short, our projection captures trends around increased spending by both bettors and operators that the state’s does not.
If these trends persist, sports betting could strengthen a wave of popularity for legal gambling that may very soon include commercial casino expansion–which NCSharp survey data suggests North Carolinians would support–and even online casinos.
North Carolina gross gaming revenue and tax revenue projection
This year, sportsbooks have seen a dramatic increase in hold percentage over last year due to the prevalence of high-risk parlays. We see this spike clearly in a state like Ohio. There, bettors spending promo credits and bonus bets on risky lines, including parlays, has resulted in a hold percentage hovering around 13%.
With such volatility, we’ve cast a wide net and considered a hold percentage range between 9%-10% to arrive at a North Carolina gross gaming revenue (GGR) of $540 million-$700 million.
NC Sports betting tax rate good for both state and sportsbooks
At 18%, North Carolina’s across-the-board sports betting tax rate is higher than most states but well below the highest-taxed states. The law also does not allow operators to deduct promo spending from their taxable revenue.
This setup ensures that the state will receive its fair share without making it difficult for smaller operators to do business.
Considering the first year GGR range, North Carolina is looking at potential tax revenue of $97 million-$126 million.
Our projection comes in well above the tax revenue projection ($64.6 million) of the fiscal note attached to North Carolina’s sports betting law.
Limitations and caveats to the projection
The fluctuations of the market, particularly the glut of high-risk parlays, is the biggest factor that could influence this projection.
Will bettors wisen up to the risky odds around these types of bets? Will regulators call out predatory promo offers? Or will operators double down and offer even more high-risk microbets in the coming football season. If discretion wins out, hold could drop back to around 8%, dropping GGR in a state like North Carolina by almost $100 million. However, conventional wisdom would bet against that outcome.
This NFL season will see operators testing out a variety of strategies to attract new players. Potential blowback could impact new North Carolina bettors watching this season from the sidelines.
As well, the increasingly fraught debate over whether to include casino expansion in the North Carolina state budget could have a cooling effect on North Carolina sports betting.
Potential Tar Heel bettors who saw casino expansion as the reason that lawmakers delayed passing a budget might sour toward legal online sports betting before it launches.
These are developments we will continue to monitor at NCSharp, as North Carolina comes into focus as perhaps the most significant state on the map for current industry dynamics.
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