The state of Texas is well represented when it comes to the NCAA Tournaments that tip off this week, and there’s a good chance at least one Lone Star State school will make it to San Antonio for the men’s Final Four next month.
However, despite all the hoopla over March Madness, the state will not be in a position to reap the benefits of it when it comes to Texas sports betting. As a result, a study by BetTexas.com discovered the state is missing out on millions in tax revenue.
The American Gaming Association last week released its annual forecast detailing that bettors will wager $3.1 billion on the men’s and women’s NCAA tourneys in the 38 states, plus the District of Columbia, that have legalized sports betting.
We wanted to know how much Texans would bet if they could have access to sportsbooks such as DraftKings, FanDuel, and ESPN BET and how much the state could receive in tax revenue from operators it could license. To do that, we took the AGA’s forecast and devised a basic market share based on data from the states, like North Carolina, that make handle and revenue totals public. From there, we adjusted the figures based on assumptions of college basketball interest related to other sports in each state.
March Madness Could Attract $600 Million Texas Sports Betting Handle
As the second largest state by population, Texas does not really have a peer we could compare it to directly for our study. New York, the fourth most populous state and the largest that licenses multiple sportsbooks. The Empire State’s population of 19.6 million is less than two-thirds of the 30.5 million who call Texas home, but New York’s share of the country’s gross domestic product, roughly 8%, is closer to the 9.3% share Texas holds.
Based on our calculations, New York’s sports betting handle of $23.2 million is about 15.3% of the total wagered in the U.S. over the past year. For March Madness, New York’s share of that handle is expected to approach $475 million. However, New York’s handle would likely have been higher if that state had allowed bettors to wager on in-state teams and on college prop markets.
Using those figures as a baseline, we determined Texans would have wagered about $600 million on the NCAA Tournaments this year. That’s assuming Texas would not prohibit wagers on in-state teams, such as the Baylor Bears, Houston Cougars, Texas Longhorns, Texas A&M Aggies and Texas Tech Red Raiders – the five in-state teams among the field of 68 in the men’s draw (the Longhorns fell on Wednesday night in the First Four).
Forecasting tax revenue is a little harder since that amount is based on how much money the sportsbooks retain. We created two scenarios to show a likely range Texas would receive. One is a 5% hold, which would likely occur if an in-state team won the tournament and/or betting favorites fared well in the tourney. The second is a 12% hold, which would indicate Texas’ teams were eliminated earlier than expected, other upsets occurred and fewer bettors won their parlays.
We also used a 15% rate for the state tax, which is what State Rep. Charlie Geren listed as the cap in House Joint Resolution 137. HJR 137 is a measure that would allow Texas voters to approve a constitutional amendment to legalize sports betting and brick-and-mortar casinos.
A $600 million handle would generate operator revenues between $30 million and $72 million based on the above scenarios. With a 15% tax, the state would be in a position to receive between $4.5 million and $10.8 million.
Remember, this would just be the amount based on the NCAA Tournaments. Betting would also take place on other sporting events happening at the same time, such as MLB, MLS, NBA and NHL games, PGA Tour golf tournaments and NASCAR races. So the revenue sports betting operators generate from those markets would generate additional tax dollars for the state.
Can Texans Bet On March Madness?
While Texas lawmakers has yet to put the question of legalizing sports betting before the voters, there are some ways Texans can make a wager or two on the tournament.
Earlier this year, online futures exchange Kalshi added sports markets for its traders. Kalshi is not licensed by the state of Texas, but it is regulated by the federal government through the Commodity Futures Trading Commission. The exchange and the CFTC are currently in the middle of a lawsuit regarding the legality of Kalshi’s political futures markets.
Initially, the CFTC expressed concern over Kalshi’s self-certified sports contract markets. However, those objections were raised by the Biden Administration’s commission. President Trump has proposed new leadership for the federal agency, and that includes Kalshi board member Brian Quintenz to chair the commission. Kalshi has also announced bringing on Donald Trump Jr. as a strategic advisor.
In addition to offering markets on its exchange, Kalshi also provides NCAA markets to Robinhood. Those are available on the online brokerage firm’s mobile app. Another exchange, Crypto.com, introduced sports markets on its app around the same time as Kalshi.
