March Madness Betting Expected To Generate $530,000 In Taxes For Michigan

Michigan March Madness betting could bring in at least $530,000 in tax revenue from NCAA basketball alone. It’ll be about a quarter of the $2.3 million in tax revenue that all of March sports betting is expected to generate for Michigan. 

Michigan March Madness 2022 projected handle v. 2021 handle

Overall, Michigan bettors are expected to generate about $650 million in sports betting handle. About $162 million of that handle will likely come from NCAA basketball. March is one of the most active sports betting months of the year. The March sports betting handle is high even compared to sportsbooks’ peak season months.  

Michigan March Madness 2021 handle v. peak season average

Sports betting is seasonal in most states. It has a peak season that runs from September to March and a slow season that runs from April to August. Further, March is consistently one of the most profitable months for sports betting during the peak season. 

Michigan Sports Betting 2022 peak season average v. 2021 peak season average

It’s one thing to have a major event like the Super Bowl that everyone tunes into, but having multiple games each week that are worth putting money on drives more revenue than a single big event. 

Nerd Box: How We Estimated Michigan March Madness Figures 

Michigan launched online sports betting in January 2021. Since most sports betting handle comes from mobile sports betting, internet sports betting figures formed the core of our projections.

First, we estimated February 2022 by using the growth rate from the previous month. Michigan handle growth has hovered around 2% since November 2021. So, continuing the pattern gave us a February handle projection. Next, we applied the March 2021 monthly growth rate, 19%, to arrive at our March 2022 handle projection. That got us to $605 million in the projected March handle. Across markets, sports betting handle dips in February then peaks in March. So, this increased growth rate was appropriate to project with. 

From there, we broke down the total March handle to NCAA basketball betting handle. NCAA basketball makes up around a quarter of a state’s total March handle. In Colorado, NCAA basketball made up 23.6% of the March 2021 handle. In Virginia, it was 27.48%. So, we split the difference and estimated that NCAA basketball would be about 25% of Michigan’s total handle. That got us from $605 million in the total projected handle to $151.4 million in projected NCAA basketball handle. 

Where’s the money going?: Michigan sports betting tax revenue use under review

Michigan Taxable March Madness Revenue

Then we used Michigan’s average sportsbook hold to calculate taxable revenue. Sportsbooks not only pay out winnings, but they also write off promotions because promotional credits don’t count as revenue. So, we calculated the average sportsbook hold over the past 11 months.

We excluded the first two months of Michigan sports betting net revenue because adjusted gross revenue went negative. That’s common when online operators first go live and offer lucrative promotions. Since that only happens at the beginning, we kept it out of our average hold rate.

Our average hold rate for adjusted revenue was about 4.2%. So, for every dollar bettors wager, about four cents trickle down to become taxable revenue. Our taxable revenue figure was $6.3 million. After that, we applied the city and state tax rates, giving us about $530,000 in tax revenue from NCAA basketball alone. 

Finally, we had to account for retail sports betting. At the beginning of 2022, retail sports betting made up 8.23% of Michigan’s sports betting handle. Since the ratio of mobile to retail sports betting remains consistent in most markets, we added an additional 8.23% onto our internet betting projections to account for retail sports betting. 

That’s how we went from $605 million in total projected March 2022 handle to the $650 million figure we based the rest of our projections on.   

About the Author

Christopher Gerlacher

Christopher Gerlacher is a writer tucked into the foothills of Colorado Springs, Colorado.