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Mobile Sports Betting in Pennsylvania Slows but Taxes Still Rolling In

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Mobile sports betting is a fully-fledged legal market in Pennsylvania. That means that residents are free to download betting apps available for Android and Apple mobile devices. 

Unlike the days of old when one had to visit a land-based sportsbook to place sports wagers, mobile betting apps have made it possible for punters to bet on their favorite sports from anywhere within Pennsylvania. 

This article seeks to highlight the performance of mobile sports betting in Pennsylvania. We’ll also mention  the latest rankings on PA betting sites, and how they work. Let’s get started.

An Overview of the PA Mobile Betting Sector

Pennsylvania imposes a high entry barrier of a one-time $10 million license fee that operators must give up to operate online and mobile betting in the Keystone State. In addition to the license fee, operators are also required to keep up with a 36% tax rate. 

These regulatory requirements are somehow rendering PA an undesirable market for most small and startup bookmakers. However, the big industry players have taken a keen interest in Pennsylvania’s online and mobile betting markets. 

How Taxes Apply to Sports Betting Winnings/Losses

When placing sports wagers at a physical or mobile bookie in PA, all winnings exceeding $600 are subject to taxation and must be reported to the relevant authorities. The amount can either be part of one big wager or smaller wagers that add up to $600. 

Federal Tax

The federal tax on sports betting winning in the US is a 36% cut. The operator will withhold this tax when cashing out payouts. In addition, they will also provide players with tax documentation. 

Winning players are then responsible for filling the IRS W2-G form to report the winnings 

State Tax

Individual states have the liberty to impose taxes on mobile sports betting, and Pennsylvania is one of the states with heavy sports betting taxes.  In the Keystone state, sports betting corporations are taxed at a flat rate of 9.9%, while individual winners pay 3.07% of their winnings in state taxes. 

Deducting Losses

Players and operators can deduct betting losses, but only as an itemized deduction. That means that they must forgo the standard deduction, which might or might not be worth doing. In addition, the deducted losses cannot be greater than the amount of gambling income reported. 

Case In Point: With $2,000 in winnings and $4,000 in losses, your losses deduction is limited to $2,000. You cannot write off the other $2,000 you lost.

Deducted gambling losses are classified as “other itemized deductions” on your Schedule A Form 1040. 

Sports Betting Revenue Insights for PA

PA’s betting handle has been increasing steadily since the summer of 2019, which is a reflection of the launch of online and mobile sports betting in the state. Let’s look at how these themes stand out when looking at PA’s sports betting financial reports

Online Betting Dominates

According to the Pennsylvania Gaming Control Board, over 85% of all sports betting handle in the state was generated by virtual bookmakers in the 2019-2020 fiscal year. In the following years, online and mobile operators have continued to take a significant portion of the total handle. 

While retail bookmakers are still a fun experience, action is shifting online because the online and mobile platforms are more convenient. Before the legalization of sports betting in New York, New Yorkers would cross state lines to place mobile sports wagers in PA, but to a lesser extent than in New Jersey. 

However, following the launch of the New York market in January 2022, mobile sports betting in Pennsylvania has declined through the first half of the year. 

Pennsylvania Is an Expensive Market for Sportsbooks

Besides the fact that New Yorkers are no longer crossing state lines to place mobile bets in PA, the state’s mobile sports betting market suffers from the high cost of operation. Bookmaker operators find the Pennsylvania a rather expensive market compared to other jurisdictions in the US. 

The commonwealth license fee of $10 million, coupled with the 36% tax on revenue is quite a hefty cost for bookies. PA has the highest sports betting tax rate among larger markets. The market is also expensive for resident punters. 

Costly regulations often result in a less diverse market which means higher prices and fewer promotions for bettors. 

However, on the flip side, sports betting is a vital source of tax revenue for the state government. In 2020 alone, the Commonwealth recorded over $80 million in taxes, 33% of all sports betting tax revenue in the United States that year. 

The tax revenue goes into a general fund despite the efforts of a fraction of government officials trying to divert it to a property tax relief fund. The state made an attempt to pass a bipartisan bill (PA SB1117) which was aimed at using PA sports betting revenue to support homeowners experiencing financial challenges during the pandemic, but the bill died in committee.  

The Health of the Overall PA Online Betting Market 

The state’s retail and online betting outlets recorded $750 million in sports bets and a record $127.6 million in online casino revenue in the last month of 2021. According to Play Pennsylvania, PA recorded over $6.5 billion in sports bets in 2021, most of them from Major League Sports. It also recorded $122.5 million in sports betting tax, and $1.3 billion in online casino revenue. 

However, the market has been slowing, with a handle of $572.8 million recorded in April 2022. That was a 19.9% drop from the previous month of March due to the slow sports calendar, but 19.5% up compared to April 2021. 

During the same month, sports betting revenue grew year-over-year to $49.1 million, but promo deductions dragged taxable revenue down to $33.7 million. Operators paid a total of $12.1 million in local and state taxes in April. 

Despite the slow mobile wagering sector, the overall market is still doing fairly well. This can be attributed to the fact that the Keystone State is home to 12 million people, some of the country’s top sports teams, and one of the largest betting markets in the USA. 

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