Iowa collects record amount on sports bets with kickoff of football season

Iowa collected a record amount of state revenue last month on sports betting with the kickoff of the football season — despite fewer bets being placed compared with a year ago.

Iowa’s 19 state-licensed casinos reported adjusted gross revenue of nearly $451 million from slot machines and table games and a separate sports wagering handle of more than $431 million that netted them $51 million in receipts for the three-month quarter that ended Sept. 30, Iowa Racing and Gaming Commission data shows.

Large Mega Millions and Powerball jackpots also fueled lottery sales. State proceeds from lottery profits stood at more than $24 million on more than $110.7 million in sales through Sept. 30, up nearly $2 million from the same time last year.

“In late July, the Mega Millions jackpot reached more than $1 billion, and in games like Powerball and Mega Millions, sales follow the jackpot up,” said Mary Neubauer, vice president of external relations for the Iowa Lottery. “So the Iowa Lottery has jumped out to a very strong start to the fiscal year, due in large part to the Mega Millions jackpot. And, now, the Powerball jackpot has topped $500 million for its drawing in Saturday. So we’re getting another sales run from that.”

The state’s fiscal year runs from July 1, 2022, to June 30, 2023.

Iowa casinos and their sportsbook partners collected more than $200 million in sports bets in September, the first full month of the NFL and college football season — $10 million less than was collected the same time last year.

But despite the dip in betting volume, July, August and September proved to be the strongest quarter on record for the amount of state revenue collected on sports wagering.

Net receipts — the total amount wagered less winnings — almost doubled compared with the same quarter last year. And net receipts for September, which represent the amount subject to state tax, was the highest on record at $25.4 million.

While the total amount wagered on sports betting in the state was down, revenue was up as more Iowans lost their bets and sportsbooks collected more, holding 12 percent of every dollar bet compared with an average of 5.6 percent last year.

The total amount wagered in September was only the eighth highest on record, and marked a 7.4 percent decrease when compared with September 2021. In comparison, the state saw $303 million wagered on sports bets in January of this year, resulting in $14 million in revenue.

“We see revenue fluctuate from month to month in the sports industry because it really depends on the outcomes and how the customers perform for a particular month,” said Brian Ohorilko, administrator of the Iowa Racing and Gaming Commission. “Revenue is not directly correlated to handle” — the total amount wagered.

Ohorilko said the lower payout and “higher hold” by sportsbooks in Iowa was pretty consistent with what operators saw in other states during the start of the NFL football season.

Unlike slot machines programmed to pay out a certain percentage, or with table games — where the rules are written to give the house an advantage — “with sports betting there is no inherent house advantage” other than the odds offered.

He noted that in February 2020, Iowans placed $56 million worth of sports bets netting only $755,000 in revenue. In that month, the Kansas City Chiefs won the Super Bowl, “and customers in Iowa played heavily on the Chiefs,” who not only won but covered the spread, Ohorilko said.

“Football season is busiest time, without question, for sports betting,” he said, adding it was ”too early to tell“ whether and how big of a dent inflation may put in Iowa’s sports betting habits.

Both he and Russ Mitchell, an analyst for the gaming industry site PlayIA.com, chalked up the dip in sports betting volume to diminished enthusiasm for in-state college football results.

“Fans bet more when they think they know more about their teams,” Mitchell said. “Iowans have probably been a little less enthusiastic about the in-state college football results so far in 2022. Other sports and the NFL will make up for a lot of that — and they did in September.”

To be fair, Mitchell said, the 2021 season was a hard act to follow. Iowa State was a preseason AP Top 25 team a year ago. ESPN’s College GameDay show came to Ames and the Iowa Hawkeyes opened the season with two Top 25 wins.

Fans who used the point spread for both Iowa and Iowa State bets went 2-2 in each team’s four September games.

“So, that was a mixed bag,” Mitchell said. “September can be tough for casual fans to track NFL results, too. Sometimes it takes a few September games to sort out the season's surprises and disappointments.”

Simply put, Mitchell said, sportsbooks were a little ahead of betting fans at the start of the football season.

“Even though betting volume was slightly lower, the sportsbooks were right more often,” he said.

Another factor was parlay betting.

“Sportsbooks want customers to fold multiple outcomes together into a single bet,” Mitchell said. “The payout is larger when customers get all of the legs of a parlay right. Far more often though, one of the outcomes goes wrong so the sportsbook comes out ahead.”

Last year was also the first year players were not required to first register in person at a casino to wager on sports. Players were able to sign up for sportsbooks over electronic devices starting in January 2021 and then place bets from anywhere in Iowa. And sportsbooks spent heavily on marketing and offering incentives to sign people up and acquire new players. This year, the advertising and incentives have not been as frantic.

Meanwhile, admissions to Iowa casinos and adjusted gross receipts fell the last three months compared with the same period last year.

Revenue dipped 1.9 percent compared with the same quarter last year. Admission was flat for month of September and down about 3 percent for the quarter, whereas revenue was up 4.9 percent for the month.

“We’ve seen this trend quite a bit in the industry the last seven to eights years — fewer people coming into the casinos but the ones that are are spending more money,” Ohorilko said.

Mitchell said he hopes Iowans are not using sports betting “as an escape hatch from financial struggles,” due to inflation and current economic and workforce woes.

“Never, ever count on games of chance to do that,” he said.

He said last month many of the largest sportsbooks in Iowa including BetMGM, DraftKings and FanDuel signed on to a national pact to change their advertising standards to market responsibly.

“They added guardrails for when customers log on or go to a casino as well,” Mitchell said. “The pact is pretty extensive, but you’ll see older actors and influencers in marketing campaigns because they want to appeal to customers 21 and over. The sportsbooks also are collectively making problem gambling prevention a bigger part of their messages.“

Comments: (319) 398-8499; tom.barton@thegazette.com