Massachusetts Regulators Finalize Rules For Sports Betting Promotional Tax Deductions
Nothing is changing in Massachusetts moving forward as far as how the state taxes sports betting revenue. The various licensees will not be able to deduct any promotional value from the revenue they are taxed on each month.
What had been a temporary provision governing that aspect of the regulations in Massachusetts is now permanent after a meeting of the Massachusetts Gaming Commission (MGC) on Tuesday. Monday saw the same body take different action regarding two specific licensees.
Massachusetts promotional deductions policy permanent
When legal sports betting in Massachusetts first began in late January, the MGC was uncertain about whether the state’s gaming law allowed for sports betting licensees to deduct the value of any promotions given to bettors from their taxable revenue. For that reason, the MGC decided to put a temporary rule in place denying that privilege upon further review.
That further review is now over. During Tuesday’s MGC meeting, commission members heard presentations on the various impacts of reversing that decision on a permanent basis. Presentations included both the responsible gambling and tax implications of such a move.
After an executive session, the various commission members elaborated on their positions for the benefit of the public. Commissioner Bradford R. Hill, for example, explained why he believed keeping promotional values non-deductible was important.
“After some reflection…and after hearing the details of what some of our experts have told us, as a regulator, and as someone who is looking out at this industry and looking at what is best for Massachusetts, I think what we need to do moving forward…is to send the word to our licensees that you will not get the exclusion,” Hill said. “You will be taxed on promo play. The reason I say that is for two reasons. One, it benefits the commonwealth in terms of tax but more importantly, if I for a second think that we’re taking money away from the healthcare trust fund that can help the people that we are all the most concerned about and that is the people who may have a problem with gambling, I really would feel that I wasn’t doing my job.”
After some more public discussion, the commission members voted unanimously to make the existing policy permanent. This also means that the experience for bettors probably will not change much going forward.
Is this good or bad news for bettors in Massachusetts?
To be thorough, there’s a slight chance that a change in this aspect of the sports betting rules might have created a more favorable situation for bettors in one way. An ability to deduct at least some of the promotional value that sportsbooks delve out would have acted as incentive in that regard.
For that reason, Massachusetts bettors might have seen more frequent and valuable promotions. However, there is no guarantee that would have been the case. Also, the downsides might have outweighed that benefit.
As Hill alluded to, that also could have translated into less tax revenue for the state. That would have meant less funding for social services that Massachusetts residents benefit from, including those who never gamble.
Furthermore, it could have translated into less funding for resources for people who suffer from pathological gambling issues. As it stands, sportsbooks have not been shy about issuing welcome offers to bettors regardless of their inability to deduct promotional values.
That situation will most likely continue given that this decision represents maintenance of the status quo. Two gaming licensees in Massachusetts will be looking to make some changes to avoid penalties, though.
DraftKings, MGM Springfield face penalties related to violations
During a separate MGC meeting on Monday, the commission members dealt with two disciplinary matters. MGM Springfield, one of the two casinos in the state, agreed to pay a fine of $45,000 regarding incidents of people under the age of 21 on the gaming floor.
During its first quarter 2023 report to the MGC on Monday, executives from MGM Springfield shared their plans for deterring such incidents in the future. MGM Springfield wasn’t alone in occupying a hot seat of sorts on Monday, though.
DraftKings also shared details about its online sportsbook accepting nearly 900 bets totaling more than $7,800 on tennis matches that did not have regulatory approval in Massachusetts. DraftKings said it voided the bets and returned the original stakes to players as soon as it identified the error.
The matches in question, part of the UTR Pro Series, are not eligible for wagering because they feature competitions between athletes under the age of 18. Such wagers are illegal in Massachusetts. The Commission only decided to consider the matter further during a dedicated hearing in the near future.
At this point, a fine is likely for DraftKings. DraftKings may have mitigated the damage by reporting the incident and returning the wagers. However, this is exactly what a regulatory body in the gambling industry exists for. Such fines and the taxation of promotional values ensure that Massachusetts’ interests are protected.