Missourians placed more than half-a-billion dollars in bets on sporting events in December but promotional offers offset the taxable profits, leaving less than $1 million to help problem gamblers and public education.
Voters narrowly approved sports betting in November 2024, with a majority of just 2,691 votes out of almost 3 million cast. The first month’s wagering far exceeded some estimates with $543 million wagered, more than 99% through online platforms.
The financial report, issued Friday by the Missouri Gaming Commission, showed the impact of provisions in the constitutional amendment allowing companies accepting bets to deduct the cost of promotional and other expenses.
The 16 licensed operators provided customers more than $125 million in free bets and other promotional benefits. As a result, most showed a negative result and deductions exceeded net revenue by $20 million.
The gaming commission received nearly $7.5 million from initial license fees paid for the 16 retail and online licenses. Two companies, DraftKings and Circa Sports, are online-only licenses, while the other 14 are either in casinos, at major sports venues or online platforms partnering with a major sports team.
The net to the state was $521,200, or less than one-one-hundredth of 1% of the total wagered.
“The license-fee total reflects the fact that a majority of the licenses issued at launch are five-year licenses,” Mike Leara, executive director of the gaming commission, said in a news release. “These figures also reflect a market in its early stages, including the impact of significant promotional deductions that are customary during initial rollout.”
The commission anticipates using 9% of the licensing fees for administration, and the remainder will be transferred to the Compulsive Gaming Prevention Fund. Most of that is a one-time infusion of money because the major licenses have a five-year life, Leara said in an interview with The Independent.
The result is encouraging despite the small total for tax revenue, Leara said. The structure of the constitutional amendment meant that small returns are likely during the opening months, he said.
“When we finally get through some of this early start up costs, we’ll see money,” he said.
The promotional offers will diminish and bettors will settle into patterns as the market matures, he said.
“In six months, we’re going to have a better gage of what to expect on the month to month basis, and I think that it will increase these numbers,” Leara said.
State Rep. Dirk Deaton, a Republican from Noel who chairs the House Budget Committee, called the revenue report “sad” and said it was what he expected from an initiative written by the online sports betting companies.
“We might as well have just made them tax free at this point,” Deaton said.
House Budget Committee Chairman Dirk Deaton, a Republican from Noel, speaks March 3 during debate on the fiscal 2025 supplemental appropriations bill.(Tim Bommel/Missouri House Communications).The initiative campaign was launched after lawmakers tried for several years, and failed, to write a bill authorizing sports wagering.
“In the General Assembly, we ought to look ourselves in the mirror,” he said. “It’s probably another example of something which we should have figured out and put a better framework in place.”
The tax on the net revenue of sports wagering platforms is 10%, less than half of the 21% tax on net receipts for the state’s 13 licensed casinos. During December, the casinos paid $36.2 million in taxes on net winnings of $172.4 million.
Leara said he agreed that the low tax revenue is due to lawmakers failing to pass sports wagering legislation.
“This could have been much different,” Leara said. “The tax rate could have been higher and the deductions would have likely, absolutely, been less.”
Under the Missouri Constitution, most tax revenue from gambling is dedicated to public schools and higher education. Casinos paid $363 million in taxes in the fiscal year that ended June 30 and the Missouri Lottery provided about $337 million.
The 2024 initiative campaign, organized by the state’s professional sports teams and paid for by DraftKings and FanDuel, two of the major online sports books, cost $43 million. An opposition campaign, financed by Caesars Entertainment, owners of three casinos in Missouri, spent $15 million.
During the campaign to pass sports wagering, voters were told it would be a windfall to education, allowing increased teacher pay and other benefits for public schools.
“It doesn’t necessarily match the commercials that got this passed, does it,” said state Sen. Rusty Black, a Republican from Chillicothe who chairs the Senate Appropriations Committee.
Black, who was a teacher before becoming a legislator, said in an interview with The Independent he is not sure when any of the promised benefits for education will be realized.
“Sports gaming will probably provide $100 million to education total, as long as I don’t die in the next 10 years,” Black said.
Only DraftKings, however, won one of the two licenses that went to online platforms that are not linked to one of the state’s casinos or major league sports teams.
DraftKings captured nearly 40% of the market, booking $195 million in bets but showing a negative net result after paying out $163 million in winnings and giving bettors $48.5 million in promotional and other benefits. DraftKings paid no tax and had $16 million in deductions carried over into January.
Circa Sports, the other “untethered” licensee, handled only $1.4 million in wagers and showed $1.3 million in deductions. Circa Sports paid $11,739 in tax.
FanDuel won a license from the Missouri Gaming Commission by partnering with St. Louis City, a Major League Soccer team. FanDuel booked $212 million in wagers but also showed a net negative result, with $166 million paid out in winnings and $53 million in deductions for promotional benefits. The company paid no tax and carries over $7 million in deductions to January.
The $543 million handle shows that the launch of sports betting in Missouri was successful, said Jack Cardetti, spokesman for the Sports Betting Alliance.
“We applaud the Missouri Gaming Commission for its hard work to ensure a smooth and successful launch,” Cardetti said in a prepared statement, “and we’ve received overwhelmingly positive feedback from Missourians who are impressed with the tools and resources available to help them monitor their play, protect their data and provide the security they feel in placing legal, regulated bets, while keeping their dollars in Missouri.”’
In a separate statement, Cardetti said the small return to the state was an expected result of the promotional deductions in the amendment.
“Like in most states, permanent, dedicated tax revenues for education will grow significantly over time after starting small in the initial months of a new sports betting program, due to investing in marketing efforts to migrate bettors out of illegal and unregulated settings toward state-licensed operators,” Cardetti said. “Missouri’s sports betting law anticipated this transition period and required millions in up front licensing fees, with nearly $7.5 million in fees already paid to the state.”
The fiscal estimates for the initiative showed revenue could be as little as nothing or as much as $28.9 million a year.
State Rep. Betsy Fogle, ranking Democrat on the House Budget Committee, said she expected more money, even with the heavy advertising of promotions to lure customers.
“I guess it’s not super surprising to me that we haven’t seen real dollars work their way into our revenue streams yet, and I would anticipate that those would increase as those promotionals have gone away,” she said.
In Kansas, where the tax and deduction allowances are similar to Missouri, operators paid taxes that were less than 1% of $2.7 billion in bets in the past fiscal year. Lawmakers in Kansas are considering whether to change the tax structure to capture more of the revenue. A similar move is much harder in Missouri because it would require another statewide vote to change the constitution.
“Because sports wagering was adopted through a voter-approved constitutional amendment, core elements such as the tax structure and allowable deductions cannot simply be adjusted by the General Assembly,” Black said in a statement.
Gambling alone cannot pay for public schools or higher education, Deaton said
“There’s no taxation structure in which that would ever be the case, or could be, unless we just were spending significantly less,” he said.
When education will see any money from sports wagering is uncertain. The amendment included a carve-out, setting aside the first $5 million in annual tax revenue for the Compulsive Gaming Prevention Fund.
Fogle, who said she voted for the amendment because she wanted to place bets, said she doubted during the campaign that education would see any significant benefits.
“I thought it was disingenuous,” Fogle said, “and I recommended people not vote for it because of the promises for education.”
This article was updated after it was initially published to include additional comments from Mike Leara, Jack Cardetti and Sen. Rusty Black and to correct a revenue amount.
