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he US government came up with a new tax framework for internet gambling in 2024, with suggestions for tax rates on online gambling operators ranging between 15% and 25%. This change in the tax environment may be of great importance to the gambling industry and its relationships with sports, especially rugby.
With the U.S. sports betting sector developing, it is hard not to reflect on how such proposed changes might mould the future of rugby sponsorships and betting partnerships.
Understanding the Proposed Tax Framework for Online Gambling
The new U.S. tax proposition intended to standardize a duty on internet gambling at between 15% and 25% across the country. This is in direct reaction to the exponential growth in the U.S. sports betting market since a landmark Supreme Court ruling in 2018 that allowed sports betting to be legislated state by state. Today, more states continue their adoption of online gambling; it has been an ever-expanding field. In 2023, the American Gaming Association estimated that U.S. sports betting generated just under $7 billion in revenue, up a shocking 40% from the year-ago period. But it has also brought concerns about how to regulate and tax the industry effectively.
Although the proposed tax framework will seek to standardize these taxes, it may also have an effect on the financial strategies of gambling operators, especially in how much they invest in marketing and sponsorships, such as those in rugby.
The change in the tax rate could both hurt and help gambling companies.
Higher taxes may cut into the profit margins of operators, which may have to review their overall business strategies, including sponsorships. For smaller, less financially stable operators, higher taxes will make it hard to remain competitive, while larger operators may be better positioned to absorb the costs, probably shifting their focus to other areas of business, including international sponsorships like those in rugby.
Impact of Tax Rate Changes on U.S. Gambling Operators
For gambling operators in the US, it was a sudden twist to the proposal to hike taxes. An increase in the tax rate may be very unappealing because companies would see that eat into their profit margins, likely increasing their costs of operations. Some might need to alter business models for those online gambling services that cross states – instances like Michigan, which has witnessed phenomenal uptake with its sports betting operators. Some could pull back on marketing budgets and others might revisit whether offering promotional incentives like “no deposit bonuses” is such a good idea.
Online gaming has taken off across Michigan, with gambling platforms offering no deposit bonus in Michigan to poach new gamblers. The offers allow gamblers to gamble without paying an initial deposit, but it does cost the operator dear. It may be hard for gaming companies with even higher taxes to offer such promotions.
They could instead reinvest their resources in more efficient methods of customer acquisition or even focus their marketing efforts on higher-value markets.
Furthermore, the changes in taxation consolidate the market of online gambling to a point where only the largest, most profitable operators remain in business. Small companies can’t adapt to it and this reduces competition in space, probably affecting the diversity of partnerships that sports teams and leagues-realizing rugby-can get with gambling companies.
The increased tax burden would be an opportunity for the established players in the market to expand their portfolios or diversify their investments. Most of the large gambling operators are already well-settled in sports like football, basketball and baseball. Such companies may view the increasing interest in rugby, added to the increasing legalization of sports betting across U.S. states, as a reason to increase their presence in the sport and boost sponsorship spending.
How the Proposal Could Shape the Future of Rugby Sponsorships
As the tax framework for online gambling continues to shift, so will the future of rugby sponsorships. This may mean that the future of rugby as a sport, due to increased taxes, is likely to be a mixed bag with the reassessment by gambling companies on how much they will invest in sponsorships. Rugby, however, is set to benefit from the continued growth of the U.S. sports betting market despite the financial squeeze.
This therefore makes rugby a quite appealing prospect for a diversification exercise in advertising and sponsorship, considering that the area is a significant virgin exposure in the betting firm market of the United States. With online gambling now regulated across such states as Michigan, for example, and therefore easier to access, the landing of new sponsorship deals has much higher chances. Rugby has some pretty devout and passionate followers; thus, perhaps a unique opportunity to reach out with marketing from the gaming market to a still quite underexposed section of the public.
While a few of the smaller operators reduced their sports sponsorship budgets, the greater exposure for rugby across U.S. television networks and streaming platforms and at events like the Rugby World Cup, could be the precursor to several new sponsors. It is likely, though, that any new sponsors will offer more lucrative deals to rugby clubs and unions as they strengthen their brands in a growing sports wagering market. Also, higher taxes may result in more strategic and integrated sponsorships, with gambling companies providing bespoke odds, live betting and unique content to rugby fans. Such partnerships would align with the digital-first nature of modern sports betting, where in-play betting and interactive fan engagement are at the forefront.
Rugby clubs will also benefit by signing deals that involve more than just kit sponsorships to include branded betting apps and/or bespoke betting content with rugby audiences.
The Growing Role of Betting in Rugby: A Global Perspective
Rugby is internationally becoming one with the betting business in all dimensions. A report by SportsRadar in 2024 says that the global sports betting market is likely to cross US$120 billion by 2025 and that rugby betting will take a bigger slice of this. In the UK, New Zealand and Australia, rugby betting is well established, with major bookmakers offering a full range of betting options on rugby events. In an attempt by gambling operators to get their entry into a developing market in the US, sports wagering means rugby is on the agenda for exposure and betting action as the sport grows across America.
Rugby is finding its footing on the ground in the U.S., especially with the growth of MLR, drawing more eyeballs and sponsors. The fact that more states take a green approach to sporting bets could further elevate rugby into the spotlight as a valid sponsorship platform for such gambling companies. By introducing specific betting markets on Rugby events and tournaments, such betting companies increase interactions with US sports fans, bringing rugby closer to the core of their bettors.
Major events such as the Rugby World Cup are giving the sport a wider reach, so one might expect even further growth in partnership opportunities between rugby and betting companies. Growth in the industry and increasing adoption of online gambling regulations in various U.S. states could boost rugby forward in sponsorships and fan engagement, thanks to the connection between betting and sports. The increased attention given to sports betting within rugby could mean an influx of innovative sponsorship deals and the opening up of new revenue streams for rugby unions, clubs and players.
Conclusively, any alteration to the U.S. online gambling tax framework could make new changes in rugby’s relationship with the betting industry. While higher taxes may create challenges for some gambling operators, they could also lead to new opportunities for rugby to secure more targeted, high-value sponsorships. With continued growth in the U.S. and global sports betting markets, rugby is well-placed to benefit from the growing crossover between sports and betting, even as the sector prepares for tax changes and changing market dynamics.
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