Mobile sports wagering

A businessman uses a smartphone to place a mobile sports bet.

Massachusetts is as close as ever to making sports betting legal in the commonwealth.

Lawmakers face a July 31 deadline to legalize sports betting. Dueling versions of H.3993 have passed the House and Senate. A conference committee composed of three state senators and three state representatives is trying to hash out the numerous differences between each chamber.

A lot of discussion has centered on college sports betting, advertising bans, licensing and tax rates. More discussion should be devoted to crafting legislation that promotes a healthy sports betting industry.

Doing so means striking a balance between maximizing tax revenue for the state and a tax rate that doesn’t punish sports betting operators. It also means creating a regulatory environment that protects bettors.

The Massachusetts House and Senate are not on the same page when it comes to taxing sports betting operators, such as Boston-based DraftKings.

The House proposal taxes sports betting operators 15% for online wagers and 12.5% for in-person betting. The Senate proposal taxes sports wagering at 35% and 20%, respectively.

Both sets of tax rates are significantly lower than those in neighboring states, such as New Hampshire, New York and Rhode Island. All three tax online wagering at 51%, and a number of operators in New York claim the tax rate is unsustainable for a robust industry.

On the surface, the proposed Massachusetts rates would not appear to be too taxing on the operators. The details inside the Senate version of the sports betting bill, however, are restrictive on operators.

The Massachusetts Senate does not want to allow operators to subtract wagers made from promotional gaming credits and federal taxes paid to determine taxable revenue. Promotional credits are wager credits or other items operators offer bettors to place bets. They enhance the user experience for bettors and can entice consumers to leave illegal books.

The higher tax rates and taxable revenue restrictions contained in the Senate version of the sports betting bill can threaten operators’ viability in Massachusetts. If taxes are too high, operators will cut costs in other areas of the business, limiting their ability to compete against illegal sportsbooks and hampering the bettors’ experience.

The American Gaming Association wrote lawmakers in May, asking them to “adopt a reasonable tax rate that will allow and encourage regulated operators to effectively compete against illegal, offshore entities that do not pay any taxes or generate any economic benefit for the Commonwealth.”

The iDevelopment and Economic Association (iDEA Growth), an industry and operator advocacy group, also wrote lawmakers earlier this month. It took aim at the Senate’s desire to penalize operators for promotional spending.

“Legislation should tax operators on real revenue and not on bets placed that produce no revenue, especially when considered the competition with the illegal market that does not pay any tax nor offers any consumer protections,” iDEA Growth wrote.

Massachusetts has sat on the sports betting sidelines for far too long. Thirty-five states and the District of Columbia have either launched sports betting or legalized it. That means 35 states are either generating tax dollars or about to be generating tax dollars from sports betting.

The commonwealth is poised to be next should lawmakers negotiate an agreed-upon bill that passes both chambers. Gov. Charlie Baker is a proponent of sports betting.

Whatever emerges from the conference committee, however, should be a bill that taxes operators fairly and encourages a healthy sports betting industry in Massachusetts. A sustainable environment for operators encourages bettors to wager legally and stay away from the unregulated illegal market, which offers no protections for consumers.

That’s a win for the state, taxpayers and bettors. The ball is in the Legislature’s court.

Jason Schaumburg is the managing editor for PlayMA.com, which covers and analyzes legal gambling in Massachusetts. He can be reached at jason.schaumburg@playma.com.