The nascent U.S. sports betting market has so far been concentrated on the eastern side of the country, but two states — Iowa and Indiana — recently brought legal sports wagering to the Midwest.
Casino gaming market conditions, as well as long-established regulatory structures for casinos, made both jurisdictions ripe to be early adopters in the sports betting boom.
Both moved the ball down the field rapidly this spring, positioning their respective casino industries to have wagering in time for football, the most lucrative sport for a book.
While their respective markets have major differences, initial handle/revenue figures from both states provide an early look at the demand for sports gambling in the Midwest. As far as which market has been more successful since launch, it’s hard to come to any definitive answer, but an early market comparison does provide some useful insights.
Year-to-date handle/revenue
From Aug. 15 through September, Iowa saw $47.1 mm in handle, generating $7.11 mm in net receipts. Retail books accounted for $21.64 mm in handle, with online/mobile generating $25.46 mm. In terms of gaming revenue, retail took in $4.67 mm, while online/mobile raked in $2.44 mm.
Fifteen Iowa casinos have retail sports betting. Seven of those casinos have online/mobile as well. Unlike Indiana, Iowa gaming regulators allowed retail and online/mobile to kick off simultaneously.
Indiana’s 13 retail books took $35.21 mm in bets in September. The books held onto $8.55 mm of the handle in the form of winnings. Hoosier State online/mobile sportsbooks debuted on Oct. 3.
Closer to an apples-to-apples comparison
It’s worth noting that Indiana is home to about 6.7 mm people, compared to Iowa’s roughly 3.2 mm.
Iowa’s market had a roughly two-week ramp up period prior to the start to the NFL and college football seasons. Indiana’s market kicked off just days before the NFL season got underway. Like the Hawkeye State, Hoosier State sportsbooks had a staggered opening schedule. Some Indiana books took their first bets after the first games of the NFL season.
For September alone, Iowa’s sports betting market took $38.52 mm in bets, only a few million better than Indiana’s market. Retail was $16.73 mm versus $21.79 mm for online/mobile.
On a per capita basis, Iowa saw roughly $12 in handle per resident in September, compared to Indiana’s roughly $5.25. Indiana’s lack of mobile explains the large discrepancy.
Per capita September retail handle in Iowa was about $5.25, virtually the same as Indiana.
Market parallels
Both Indiana and Iowa currently enjoy regional exclusivity for legal sports betting.
None of Iowa’s six neighbors (Missouri, Nebraska, South Dakota, Minnesota, Wisconsin, and Illinois) have legal sportsbooks. Same goes for Indiana’s four bordering states (Ohio, Kentucky, Illinois, and Michigan). Iowa and Indiana were wise to get ahead of the curve in about 15 months after the Professional and Amateur Sports Protection Act of 1992 fell before the U.S. Supreme Court.
Illinois legalized sports betting this year, but the process of implementing the new law isn’t anywhere close to being complete.
Both casino gaming markets sans sports betting have been sluggish. Iowa and Indiana had gaming market growth of 0.30% and 0.04% in 2018, respectively, according to the American Gaming Association. Indiana’s is substantially larger, with its casinos winning $2.24 billion in 2018 compared to Iowa’s $1.46 billion.
Both casinos needed the shot in the arm from legal sports betting, and their respective state legislators didn’t drop the ball in 2019, though Iowa did make the mistake of an in-person registration requirement.
That requirement will expire in 2021, but in the meantime, Iowa’s online/mobile handle will be diminished. Would-be bettors have to first travel to a casino in order to bet anywhere in the state. Another slight against Iowa is the law containing a ban on props involving Iowa collegiate teams. Indiana doesn’t have this pesky restriction for its industry.
Long-term potential
A 2017 study from Oxford Economics, commissioned by the AGA, provided projections for every state’s sports betting market (at maturation) under different tax rate scenarios. Indiana legalized sports betting with a 9.5% tax rate, compared to Iowa’s effective rate of 7.5%.
The tax rates are comparable (as well as relatively low compared to other states), but the two percentage point difference could impact their respective markets.
The Oxford Economics study found that Indiana could see $6.55 billion in handle under a 10% rate, with Iowa projected to see $3.73 billion in handle under the same rate. Under a 6.75% rate scenario, Indiana was projected to see $7.59 billion in annual handle, compared to Iowa’s $4.33 billion.
In other words, based on the tax rates under their respective sports betting laws, the two markets will be closer in size than they would be if they had the same rates — but Indiana’s market will still be substantially larger, fueled by a population that’s more than double in size.
It also doesn’t hurt that Indiana has major pro sports teams, unlike Iowa. The ban on props for Iowa collegiate teams sure isn’t helpful. The state could revisit that provision later.
The logic behind a diminished market under a higher rate is that legal books will offer slightly less attractive prices (odds) to consumers than they would under a low rate. States, of course, try to balance creating a healthy market while also generating a certain level of tax revenue for their coffers.
That’s one thing Iowa’s market has going for it relative to Indiana.
