When Pennsylvania rolled out legal sports betting last year with a tax rate of more than 34 percent and a hefty license fee, most companies bit the bullet and paid up. But the real reason these companies agreed to play was because it also gave them entrée into real-money online casino gaming, with lower tax rates and higher profits resulting in more tax revenue. Even before the widespread legalization of sports betting, it was recognized that sports bettors are a much lower value than either land-based or online casino gamblers.
In March, Jefferies analyst David Katz issued a report outlining just how much more valuable those gamblers are, and the results were astonishing. Online casino gamblers are more than seven times as valuable, and many of those customers sign up as sports bettors first and migrate to the iGaming side of the site. So operating a loss-leader sportsbook in Pennsylvania could lead to much more profitable casino players.