Free bets and promotions are a staple of sports betting but budget-related changes in Virginia could affect these offerings going forward. Deducting free bets and other promotions from taxable revenue could change for some operators.
Virginia law allows operators of online sportsbooks to deduct the value of promotions provided to bettors from its revenue, which is then subject to a 15% tax rate.
Since 2021, when sports betting became legal in Virginia, several bookmakers have used these promotions and free bets to acquire customers.
The deductions via this process have also saved operators money in taxes, with nearly $10m in bonuses and free-play incentives being reported by 14 licensed operators in May of 2022.
This reduced taxable revenue by the same amount and resulted in $3.9m in tax payments to Virginia. The new legislation targets how long operators can make these deductions.
Now, these operators can only make those deductions for a year after they start taking bets. This means operators such as FanDuel, DraftKings, BetMGM, BetRivers, Caesars Sportsbook, WynnBET and Unibet can no longer claim these deductions as the companies have been in operation for over a year in Virginia.
This adjustment went into effect earlier this month and could shift the way that these operators target customers.
Deputy Director of Gaming Compliance Gina Smith for the Virginia Lottery commented: "It'll be interesting to see how they change what they offer to the patrons as we move forward."
FanDuel claimed the largest share of the state's sports-betting market through May of 2022 at approximately 41%, followed by DraftKings at almost 22.2%, and then BetMGM at nearly 19.7%.
