Exploring whether Amendment 2 to legalize sports gambling a good deal for Missouri taxpayers

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Missouri could become the 39th state — plus the District of Columbia — to legalize sports gambling on Nov. 5.

Bettors in Missouri have watched multiple times as bills get bogged down by GOP infighting since the federal law prohibiting sports gambling was struck down six years ago, while seven of eight neighbors had legalized sports gambling.

Now, Show-Me State voters get a chance to weigh in on Amendment 2, which would impose a 10% tax on adjusted gross sports-wagering revenue. The money would be earmarked for Missouri’s schools, so is it a good deal for the state?

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“I think it’s a good deal for Missouri and a good deal for taxpayers,” Mark Richardson, who headed to the polls Tuesday in Blue Springs on the first day of no-excuse absentee voting in Missouri. “Some of that revenue can go toward education.”

Ads for and against Amendment 2 have focused on education funding, with sports-gambling proponents touting a $105 million impact in the first five years and opponents claiming such projections are overstated.

“I think there’s some concern that it will not be what we think it’s going to be,” voter Sharon Henne said.

Missouri voters remember the promises about education funding when riverboat casinos first became legal. While that money did go to schools, the legislature cut previous allocations from general fund, blunting gambling revenue’s impact on school funding.

“There’s a real concern about whether this will be additional money (for education) or if it will end up being swapped for general revenue,” Beth Vonnahme, a political science professor and the associate dean at the University of Missouri-Kansas City’s School of Humanities and Social Sciences said. “I think that’s a big concern and I think voters should pay attention to that, because it’s not guaranteed money for education.”

But she said that’s not the main issue voters should focus on given the legislative infighting and uncertainty how much tax revenue Amendment 2 could generate.

“There are a lot of variables there that are going to determine whether it is a very low level of revenue or quite high revenue,” she said. “I don’t think we know what that’s going to look like. … If I were a voter, I would focus on: Do I think that sports betting should be legal in Missouri? Full stop. I don’t think paying attention to the debate over the tax revenue is useful for voters at this point.”

The reality is that sports-gambling revenue, at least based on the formula laid out in Amendment 2, isn’t likely to make a significant impact for schools.

Even the most optimistic tax-revenue projection — which comes from an August 2024 Eilers and Krejcik Gaming report, which was paid for by a pro-Amendment 2 campaign committee funded by mobile-gaming operators — pegged year-five projected tax revenue at $38.7 million, which would less than 4% of Missouri’s nearly $9.8-billion education budget during the current fiscal year.

“I don’t think it’s transformative for education,” Vonnahme said. “If you look at the actual bucket for education, this would be a drop in the bucket.”

The flip side is that Missouri currently isn’t collecting a dime in sports-wagering tax revenue even though its residents are forking over millions in neighboring states, including Kansas.

“Missourians have been exposed to sports betting now for a number of years in the neighboring states,” Spectrum Gaming Group Executive Vice President Joe Weinert said. “People right now, they’re betting on the Chiefs, but chances are they’re just going across the border to KCK to do it. So, it’s ingrained. They’ve no doubt, because they’re in the Kansas City media market, been bombarded with advertisements, so betting is there. It’s there to stay whether Missouri passes this amendment or not.”

The nation’s largest mobile sports-betting platforms, FanDuel and DraftKings, helped craft Amendment 2, which includes a relatively low tax rate and carve-outs to further reduce that tax burden, and have poured millions into lobbying and advertising efforts to convince voters to sign off.

“You can’t fault the industry for looking out for its best interest,” Weinert said. “10% certainly is at the low end, if you look at what other states are doing, but, hey, good for the sports betting operators. … The digital sports betting companies — they’re very aggressive, they’re very well funded, they’ve proven that they’re willing to spend whatever it takes to attract and retain customers and, in this case, they’re going to spend whatever it takes to make sure this issue passes.”

Weinert’s consulting group specializes in the economics, regulation and policy of legal sports gambling. He expects Missouri voters to legalize sports betting, which is corroborated by recent polling from Emerson College in September and SLU/YouGov in August.

Weinert said Missouri’s legislature probably could have designed a bill that captured more tax revenue.

“A good deal is in the eye of the beholder,” Weinert said. “Essentially, the voters are being asked to approve of something that’s illegal right now, so typically a legislature has the upper hand in doing this — because ideally they’re looking out for their constituents best interests, just as the sports betting operators are looking out for the best interests of their stakeholders. Typically, it’s a push-pull among lobbyists and the legislatures where to go.”

That didn’t happen in Missouri.

“I think it is a failure of the legislature,” Vonnahme said. “Is it too late? No, but I think that it is coming a bit late compared to the other 38 states, including the other surrounding states that have adopted and been benefiting from some of the tax revenue. … Is it a bad deal? No. Is it a great deal? No. It’s somewhere in between. I think it’s about as good a deal as Kansas got. I don’t think you’re going to see the kind of revenue you’re going to see being generated by some states.”

If Amendment 2 passes, Missouri would have to launch legal sports wagering in the state by Dec. 1, 2025, but proponents hope it could some much sooner than that. A simple majority is needed for the amendment to pass.

Varying tax rates

Kansas originally planned to tax sports-gambling revenue at 20%, but industry lobbyists successfully halved that tax rate.

They claimed that a higher tax rate — which operators pay, not betters — would drive wagers in Kansas to illegal sites, according to The New York Times, despite no evidence to support that from states with considerably higher tax rates.

Mobile and online sports-wagering tax rates vary wildly, from 1.85% of the total handle in Tennessee, to 51% of the adjusting gross revenue New Hampshire, New York, Oregon and Rhode Island.

Tax rates for retail operations also run the gamut, from as low as 6% in Montana, to as high as 51% in Oregon and Rhode Island, but wherever it’s legal casinos and mobile gaming operators follow — regardless of the tax rate.

Where is sports gambling legal?

Sports gambling is currently legal in 38 states and the District of Columbia.

Five states — Florida, New Mexico, North Dakota, Washington and Wisconsin — only allow such betting at tribal casinos or, in Florida’s case, in-person and via the Seminole Tribe’s Hard Rock Bet app.

Two states, Tennessee and Vermont, only allow mobile or online sports betting, while eight states — Mississippi, Montana, Nebraska, New Mexico, North Dakota, South Dakota, Washington and Wisconsin — only allow sports gambling at retail locations.

Sports gambling is legal in some form in seven of Missouri’s eight neighboring states. Oklahoma is the only other holdout.

Retail and mobile sports betting is allowed in five Show-Me State neighbors — Kansas, Iowa, Illinois, Kentucky and Arkansas — while Nebraska only allows retail sports gambling and Tennessee only allows mobile sports betting.

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