Proposed Law Would End Sports Betting Monopoly in Rhode Island

A law sponsored by four state legislators would terminate International Game Technology’s sports betting monopoly and expand the field to at least five online sportsbooks operating in Rhode Island.

End of an Error?

In exchange for sports betting exclusivity, UK-based International Game Technology (IGT), the state’s lottery provider, agreed to pay 51% of its revenue to Rhode Island’s tax coffers. New Hampshire and Oregon are the only other mobile sports betting markets with the same agreement, with the only difference being DraftKings is the sole platform in both of those states and not IGT.

All other digital sports betting markets in the US have multiple sportsbooks but lower tax rates. In any business, competition usually breeds a better product and lower prices. However, Rhode Island crafted its deal around a much higher tax rate in exchange for granting exclusivity.

IGT is not a name that immediately leaps to mind when discussing the nation’s major mobile sportsbooks. That distinction belongs to FanDuel, DraftKings, Caesars, BetMGM, etc., and those are the household names that compete daily in US markets across the nation. Yet, it appears as though the conventional wisdom in other states is seeping into the Ocean State as Senators Frank Ciccone, John Burk, Todd Patalano, and David Tikoian introduced SB 748, a bill that would establish licenses for at least five sportsbooks in 2026 when IGT’s contract ends.

Since launching mobile sports betting in September 2019, IGT has accepted more than $2.5 billion in bets, generating north of $214 million in revenue with the state collecting more than $110 million in taxes. The number crunchers will have to determine whether lowering the tax rate but engaging multiple platform providers will produce greater returns.

Attracting Bidders

It is uncertain whether IGT would be interested in applying for one of those licenses, but although it would lose its monopoly, it may enjoy a lower tax rate. Still, what that tax rate would ultimately be is unclear, as this bill simply sets the stage for not renewing IGT’s exclusive sports betting contract and wooing at least five mobile sports betting platforms into the fold.

It would be illogical for the state’s 51% tax rate to remain if it wishes to attract several competitors. Rhode Island is the seventh smallest state in the union and has a population of only 1.1 million people. Compare that to New York, also with a 51% tax rate, but boasting a population of nearly 20 million.

It simply would not be feasible, but should the prevailing tax rate stay intact, it is likely the state would get no takers, considering the sportsbooks complain often about New York’s onerous 51% tax rate despite it being the most lucrative market in the nation.

As of this writing, this bill has been referred to the Senate Labor and Gaming Commission, but it may not see the light of day during this legislative session, as there are approximately 30 other bills queued up and may be deemed more pressing than SB 748.