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Among the top-line sports wagering numbers the Virginia Lottery published in its February revenue report Friday, the one that stood out the most was the $7.8 million in promotional deductions reported by operators.
It was more than 10 times the $768,221 reported for January. It was also the first time since September that the figure exceeded $1 million. Additionally, there was the mystery of who among mobile operators in the Old Dominion would be able to count promotional deductions against its gross revenue.
The Virginia Lottery does not disclose operator-specific figures in its monthly reports, but it was known that the state’s big players — FanDuel, DraftKings, and BetMGM –were not in the group that could claim such credits. The three were among seven operators that could no longer deduct promotional and bonus credits starting last July, when a budget amendment passed ahead of the start of Fiscal Year 2023 banning mobile books that had been in the state for more than 12 months from deducting promotional credits.
The mystery, though, was revealed when the Public Records department of the Virginia Lottery fulfilled a Freedom of Information Act (FOIA) request by Sports Handle on Tuesday. The overwhelming majority of the $7.8 million figure — 96% of that amount — originated with bet365 during its first full month of operation in the state.
Why promotional deductions matter
Running Top 10 #SportsBetting handle for February by state:
1 New York $1.47B
2 New Jersey $847.4M
3 Nevada $659.4M
4 Ohio $639.8M
5 Pennsylvania $599.5M
6 VIRGINIA $433.8M <-NEW
7 Colorado $425.1M
8 Michigan $357.2M
9 Indiana $356.2M
10 Maryland $339.4M— Chris Altruda (@AlTruda73) April 5, 2023
Promotional spend in the Old Dominion is a touchy subject. Momentum currently sides with state government, as that budget amendment passed for Fiscal Year 2023 has created a sizable difference in state tax revenue. Receipts for the first nine months of FY2023 have totaled more than $47.6 million, compared to the $35.5 million Virginia received in its first 17 months of wagering.
The rise in tax revenue comes with the expected drop in promotional credits allowed for deductions. The big three of FanDuel, DraftKings, and BetMGM averaged $10.1 million in monthly promotional deductions in the six months before the budget amendment was passed, with BetMGM averaging $4.6 million on its own. With Virginia’s tax rate on sports wagering 15%, the state lost over $9 million in tax revenue from those three operators alone the first half of 2022.
By any standard, even with a month that allows operators the opportunity to lavish promotional offers with the Super Bowl in February, bet365’s spend in Virginia was notable. Excluding a four-month period from July 2021 to October 2021 when Sports Handle was not able to expeditiously obtain figures via FOIA requests from the Virginia Lottery, bet365’s $7.5 million in promotional credits deducted is the highest monthly total in the history of the state.
Only five other operators — BetMGM ($6.2 million), FanDuel ($5.4 million), DraftKings ($3.6 million), Caesars Sportsbook ($3.1 million), and PointsBet ($1.1 million) — claimed seven-figure promotional deductions in any month of wagering in Virginia in the 22 months of available figures. The question for bet365 is whether it can convert this spend into customer acquisition.
The promotional deductions helped swing bet365’s gross gaming revenue to a negative adjusted gross revenue of nearly $2.7 million. The sportsbook paid nothing in state taxes despite reporting $5.3 million in gross revenue thanks to an eye-watering 33.9% hold on $15.6 million handle. When including its first full month of wagering in January, bet365 has an overall negative AGR of nearly $3 million, a figure that may be slow to decline depending on operator performance and bet365’s willingness to continue to spend in Virginia.
Bet365’s strategy, though, may have to do with making its long-awaited splash in the U.S. market in 2023. With the exception of Virginia, the other three states — New Jersey, Colorado, and Ohio — bet365 has launched in are in the top 10 nationally for handle. It has already lavished $25.6 million in promotional spend in the first two months of wagering in the Buckeye State, nearly double the $13 million in adjusted gross revenue generated on the strength of an 18.6% win rate.
Ohio, though, may carry more risk for bet365, as it cannot deduct any promotional credits through 2026. The simultaneous launch, however, may be more conducive to bet365 flooding the market — its $69.6 million handle ranks fifth overall and is within $4.4 million of Barstool Sportsbook for fourth in Ohio. And its $15.6 million handle for February represented 3.6% of Virginia’s $433.8 million in accepted wagers.
Elsewhere in the state
All-time Top 10 #SportsBetting handles post-PASPA (Feb in CAPS)
1 NEW JERSEY $35.7B
2 NEVADA $31.1B
3 PENNSYLVANIA $20.3B
4 NEW YORK $19.9B
5 Illinois $18.7B
6 INDIANA $11.3B
7 COLORADO $11.2B <-NEW
8 MICHIGAN $9.8B
9 VIRGINIA $9.1B
10 Arizona $8.4B#GamblingTwitter— Chris Altruda (@AlTruda73) April 3, 2023
FanDuel maintained its iron grip on the No. 1 spots for gross revenue and handle, extending its run of months with at least $20 million in the former category to six with $20.4 million. The online titan also had its eighth consecutive month with a double-digit hold, landing at 11.6% for February from a handle of $176.4 million.
DraftKings also reached nine figures for handle, totaling $116.6 million. It had a 6.3% win rate, resulting in more than $7.3 million in gross revenue. BetMGM rounded out the top three in both categories, but its 6.8% win rate was its lowest in the last 17 months of known figures, as it claimed just over $4 million in gross revenue from $59 million handle.
Caesars claimed $1.4 million in gross revenue and was the only other mobile operator to reach seven figures. Betway ($18,509) and Bally Bet ($654) were the only mobile books to report gross revenue losses for February, while Hard Rock‘s retail location in Bristol paid out $102,111 on top of its $1.2 million handle.
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