Is Sports Betting on the Horizon for Hawaii?

This year has brought a host of proposed legislation to bring legal sports betting to states that currently do not have their own platform.

We can officially add Hawaii to the list of states that will see a legislative push toward legalization this year. Last week, Sen. Ronald D. Kouchi introduced Senate Bill 3376 and it passed first reading on Friday.

Previous attempts to legalize a sports betting platform in the Aloha State have yet to gain much traction, but Senator Kouchi hopes his plan to direct tax revenue from such a platform toward a wildfire relief fund may just force lawmakers to give the idea a second look. 

Last year's wildfires that ravaged Maui have created an estimated $6 billion in economic losses for the state. Hopes are that some of those losses could be recuperated from the taxation of a legal sport wagering and online poker platform. Early projections have a legal Hawaii sports betting platform generating $6.8 million per year in added tax revenue.

Currently, Hawaii is one of just two states in America with zero forms of legal gambling. At present, Hawaii has no casinos, no sportsbooks, or even a state lottery which could contribute to tax coffers.

Details of Senate Bill 3376

Senate Bill 3376 proposes the legalization of mobile sports betting and online poker for residents and visitors of the Aloha State. There is no mention of retail sports wagering.

The bill paves way for one single operator to take control and manage the legal sports betting platform in Hawaii under the watchful eye of a newly formed Hawaii Gaming Control Commission.

The tax rate, under the bill, would be set at 70% of all revenues for the first year. That rate would decrease by 5% every year after that for 14 years, before settling on a 5% tax rate in the final year of the revenue sharing plan.

Operators may shy away from Hawaii scene

There are a couple of aspects of Bill 3376 that may make the Hawaii scene unattractive to the best sports betting apps. Firstly, the single operator system has produced underwhelming results in the jurisdictions it is present in. 

Simply put, lack of competition isn't a model that has been all that successful so far in the broad and growing U.S. scene.

The tax model proposed could also function as a deterrent for the best sportsbooks hoping to make Hawaii home. A tax rate of 70% may scare operators like DraftKings and FanDuel away. Other states with similar legal sports betting models have adopted a 30% first year revenue cut to the state.

Wildfire tax fund

Tax revenue is typically one of the biggest selling points for any prospective new sports betting jurisdiction and Hawaii is no different. A nod to wildfire relief is a clever and potentially game-changing inclusion to a legal sports wagering proposal for the state.

Up to $6 billion will be required to recover from last year's fires. Currently Hawaii has no real plan to generate that much tax revenue. Because of that, sports betting and online poker could benefit from a funding necessity window created by the devastating natural disaster.

Acknowledgement of what is already going on

As in most states, legislators have been forced to wrestle with the reality that legal sports betting at betting sites is already taking place in their state. In fact, the Bill's language reads: 

“The legislature finds that tens of thousands of Hawaii residents illegally gamble using online sports and poker gambling websites or cell phone apps. These gambling websites often are operated offshore and are not subject to regulation or taxation by the State. Questions arise about the honesty and fairness of games offered to Hawaii residents, but neither federal nor state laws currently provide consumer protections for Hawaii residents who gamble online.”

The Bill goes on to say that “Tens of millions of dollars generated from online gambling are being realized by offshore operators illegally serving Hawaii residents, but no benefits are provided to the State.”