Is Kansas ready to legalize sports gambling?
Amina Seck
Feb. 15, 2019
A recent U.S. Supreme Court decision is spurring important questions for Kansas lawmakers about the economic and social costs of legalizing sports gambling. Last year, the high court struck down the near-national ban on gambling in Murphy v. National Collegiate Athletic Association. The Supreme Court deemed unconstitutional the 1992 Professional and Amateur Sports Protection Act (PASPA), which had outlawed sports gambling in all but four states.[1]
As a result, Kansas may be able to raise additional funds for education and other public services through the state operation of sports gambling. However, the costs that sports gambling would impose on the state and its residents may make this new source of revenue more attractive in theory than in practice. To understand the full impact of legalizing sports gambling, the legislature should set up a committee to examine the direct costs and externalities of the potential legislation.
Sports gambling or betting is the activity of predicting a sports event and placing a wager (money or goods) on an outcome as a bet.
Kansas has previously considered sports gambling legislation
During the 2018 legislative session, Kansas lawmakers introduced four bills to legalize sports wagering[2] in anticipation of the U.S. Supreme Court ruling.[3] However, lawmakers stalled the legislation, deciding instead to wait for the Supreme Court’s decision.
The definition of gambling in Kansas is making a bet, entering or remaining in a gambling place with the intent to bet, participate in a lottery or play a gambling device, and playing a gambling device.[1]
One proposed sports wagering bill, House Bill 2792, would have allowed sports wagering opportunities for those 21 years or older.[4] The legislation proposed would have given the Kansas Lottery the authority to offer in-person sports wagering at their facilities. In addition, the bill proposed allowing lottery retailers to facilitate online sports wagering with the permission of the Kansas Lottery.
Estimated tax revenue from sports wagering
While sports gambling will not generate revenue to the state immediately, the Kansas Division of the Budget estimates that $1.5 billion in wagers would be made if sports gambling were legalized. Of this, 95 percent would be paid to the individual winners. The remaining five percent, or approximately $75 million, would go to the state. However, not all of it would be revenue, as the $75 million would also pay for:
- Operators’ expenses and profit,
- Fees (like the integrity fee),
- Federal taxes of 0.25 percent, and
- Payment to the Expanded Lottery Revenues Fund (ELARF) of 6.75 percent.[5]
Implementation of sports wagering can bring unintended consequences
While legalizing sports gambling could bring additional revenue and jobs to the state, it could also create additional costs. Legalizing sports gambling would introduce newexpenses, such as facility construction or the new software and additional staff needed to regulate and collect taxes on sports betting. Legalization could also result in unintended consequences related to gambling addiction and new obstacles, such as legal challenges.
The impacts of sports wagering on individuals with gambling addictions, including financial loss and emotional distress, must be addressed. States that depend on gambling revenue encourage their residents to gamble more through state-sponsored advertisements.[6] Policymakers should exercise caution that they are not relying on addictions of constituents to fund public services.
Lawmakers who advocate for legalizing sports gambling often promise to use the revenue to increase spending for education.[7] However, lawmakers may shift revenue sources, using gambling revenue to replace previous revenue sources for education, resulting in no real change in education funding.[8]
Recommendation
While the recent U.S. Supreme Court decision allows states to legalize sports gambling, Kansas lawmakers must consider the ramifications of the potential legislation. Sports gambling can provide revenue, but it can also cost the state money and harm certain residents. While new revenue opportunities should be explored, policymakers must ensure they do not unintentionally cost Kansans more.
[1] Delaware, Montana, Nevada and Oregon
[2] While the U.S. Supreme Court was processing the Murphy v. National Collegiate Athletic Association decision.
[3] The sports gambling bills were HB 2533,[3] HB 2752,[3] HB 2792[3] and SB 455.
[4]http://www.kslegislature.org/li/b2017_18/measures/documents/hb2792_00_0000.pdf
[5] State of Kansas. Division of the Budget. Fiscal Note for HB 2792 by House Committee on Federal and State Affairs. March 27, 2018. http://www.kslegislature.org/li/b2017_18/measures/documents/fisc_note_hb2792_00_0000.pdf
[6] “Uncertain Benefits, Hidden Costs: The Perils of State-Sponsored Gambling”. Institute on Taxation and Economic Policy. October 2011. https://itep.org/wp-content/uploads/pb19gamb.pdf
[7] “Uncertain Benefits, Hidden Costs: The Perils of State-Sponsored Gambling”. Institute on Taxation and Economic Policy. October 2011. https://itep.org/wp-content/uploads/pb19gamb.pdf
[8] “Uncertain Benefits, Hidden Costs: The Perils of State-Sponsored Gambling”. Institute on Taxation and Economic Policy. October 2011. https://itep.org/wp-content/uploads/pb19gamb.pdf
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