A bet on March Madness in New Jersey could generate $300 million in revenue from NCAA basketball alone. Based on other markets, NCAA basketball is expected to account for about a quarter of the total $1.2 billion the state plans to process in his March.
NCAA basketball would also be a lucrative tax revenue source in New Jersey. In his March of this year, he is expected to make $2.8 million in tax revenue from NCAA basketball alone. A lot of money can be made from one sport.
Sports betting is a seasonal business, with a peak season from September to March and an off season from April to August (bettors wait for the next NFL and NBA seasons). This level of seasonality is best seen when looking at earnings history across New Jersey. Sportsbook seasonality can also be seen during COVID shutdowns.
However, New Jersey’s previous sports betting season from September 2020 to August 2021 is unique among sports betting markets. The busy and slow seasons were still different, but close. This peak is also higher than the previous peak. This is no surprise, as New Jersey’s sports betting industry continues to mature.
Additionally, handle counts in March 2021 were -0.4% of the average handle count for that peak season. This is unusually low compared to the increase in processing seen every March in other sports betting markets. This reduction in variability between peak and offseasons and the explosive growth New Jersey has already experienced this season formed the basis for our 2022 forecast.
Nerd Box: How to predict the New Jersey March Madness betting figures
Predicting New Jersey’s total betting handles was easy. We took the average of this year’s peak and that’s the handle number for March. This year’s peak season has averaged $1.2 billion in processing volumes, which gave him a projected March processing volume.
Therefore, it was very important for New Jersey to have unusually little variation within peak season and between peak season and off-season. In this way, we could rely on peak season handle averages without adjustment.
We then assumed that NCAA betting accounted for 25% of sports betting processing in New Jersey. This is the case for Colorado and Virginia, where NCAA bets accounted for 23.6% and 27.5% of total turnover respectively. Therefore, 25% is your go-to guide for isolating NCAA basketball handles. (And a quarter of $1.2 billion is $300 million.)
To estimate NCAA sportsbook earnings, we used the average New Jersey sportsbook holdings to predict how much to hold as total earnings. Since sports betting was legalized, New Jersey sportsbooks have averaged 7.5% ownership. As such, we were able to use 7.5% of the expected NCAA handle to generate $22.4 million in taxable NCAA earnings.
New Jersey NCAA Basketball Tax Revenue
Forecasting tax revenue required a few more steps.Paid by New Jersey Sportsbook Operators different tax rates About retail and internet sports betting. New Jersey imposes a tax of 8.5% on retail sports betting earnings and 13% on Internet sports betting earnings. There is also an additional tax rate of 1.25% applicable to Atlantic City tourism and marketing programs.
So, to get an idea of how much of a sportsbook’s total revenue goes into tax revenue, we took the average tax rate. Since the legalization of sports betting, an average of 12.7% of a sportsbook’s total revenue has been taxed. This takes into account the different tax rates for retail and internet sports betting without asking for a ratio of monthly online sports betting to retail sports betting.
Using 12.7% of projected NCAA taxable revenue, March Madness alone projected $2.8 million in tax revenue.