NEW YORK (Reuters) - Rhode Island Governor Gina Raimondo signed a $9.6 billion budget for fiscal 2019 on Friday that legalizes sports betting and gives the state 51 percent of the revenues from the wagers.
The budget for the fiscal year starting July 1 counts on $23.5 million of new revenue from sports betting, though the activity is not expected to go live until Oct. 1.
Even so, the move could give Rhode Island an early edge in New England’s sports betting market, as states across the country look to legalize the activity after last month’s U.S. Supreme Court ruling overturning a 1992 law that barred it in most places.
The smallest U.S. state does not soon plan to take sports wagers online, however, meaning bets can only be placed inside casinos.
That could put it at a disadvantage, especially if neighboring Massachusetts and Connecticut eventually allow customers to place wagers anywhere in the state over the internet.
“It could create a flight of customers,” said Daniel Wallach, an expert in gaming and sports law.
Massachusetts is expected to include online wagering in legislation later this year, Wallach said.
Some states may never legalize sports bets, and each state that does has its own set of concerns - as illustrated by Rhode Island’s cautious approach to going mobile.
“We wanted to start small and make sure we have the operational system down pat in the casinos before we explore online or mobile,” said Paul Grimaldi, spokesman for the state’s Department of Revenue.
The department oversees the Rhode Island Lottery, which will operate sports betting in addition to existing games of chance including Powerball and instant scratch-off tickets.
Those games are sold by lottery agents, with whom the state has a decades-long relationship that it does not want to damage by rushing into online sports betting, Grimaldi noted.
“For some, lottery tickets are a key driver for their customers and we don’t want to steal that away,” he said.
The sole bidder to be the state’s sports betting technology vendor was International Game Technology PLC, a U.K. gaming company with a major office in Rhode Island’s capital city Providence.
Customers will be able to place sports bets at two Twin River-owned casinos, one of which is set to open in September.
If a player loses $100 on a sports bet, the state will keep $51, IGT will get $32 and Twin River will get $17, but those rates do not sit well with critics.
“High tax rates hinder the legal market’s ability to compete with shady, illegal operators that don’t pay taxes back to the state,” said American Gaming Association spokeswoman Sara Slane.
Additionally, the low take for casinos may limit their spending on promotions.
“The relatively small share allotted for casinos means that those casinos have little incentive to market the product, which will dampen revenue potential,” said Chris Grove, senior analyst for PlayUSA.com.
Reporting by Hilary Russ; Editing by Daniel Bases and Tom Brown