The difference between handle and revenue in real-money sports betting is basic and straightforward. However, it still seemingly confounds some in the general public, not to mention plenty of lawmakers that have conflated the two metrics when discussing the potential financial impact legalized sports betting could have on their states.
It’s certainly crucial to distinguish between the two for the sake of accuracy in that context. Moreover, an understanding of the difference also helps put the effect the 1 percent integrity fee that the NBA and MLB have requested would have on sportsbooks’ bottom line into proper perspective.
What defines “handle” in sports betting?
Handle is defined as the total amount of money wagered by bettors at a sportsbook over a given period. Naturally, handle can be measured over different chronological increments, as well as by different sports, type of bets, and a number of other metrics.
What defines “revenue” for a sportsbook?
Revenue in the sports betting realm is defined as the amount of money a sportsbook retains from total handle after paying out winners. As with handle, revenue can be measured utilizing multiple time and sports/bet-type splits.
How much revenue does a sportsbook generate?
Typically, sportsbooks hold just under five percent of handle. However, 2017 was a record-setting year overall. According to the Nevada Gaming Control Board, there was a record $4.87 billion in handle compiled in the state’s sportsbooks, leading to new high-water mark of $248.4 million in revenue. This put overall revenue at approximately 5.1 percent of handle. Notably, handle in Nevada’s sportsbooks has now been over $4 billion for three straight years for the first time.
How would a 1 percent integrity fee affect revenue?
Even factoring in the aforementioned record numbers, sportsbooks are still typically operating at fairly slim profit margins. And if this is the lay of the land in a legacy sports betting state like Nevada, it may be even more of a factor in the early years of legalized wagering in other states.
Therefore, a 1 percent integrity fee is believed by many to essentially be a non-starter for would-be startup sportsbooks around the country in a potential post-PASPA environment. Essentially, for the estimated $5 that every sportsbook holds in revenue from $100 in handle, they’d be surrendering $1 (20 percent) to each pro sports league demanding such a fee.
Coupled with existing federal excise tax (currently calculated at .25 percent of handle) and any state tax rates that apply, sportsbooks would literally be paying for the right to lose money, a naturally untenable scenario.