Colorado sports bettors are poised to generate $125 million in NCAA basketball sports wagers alone. In a month that could see a record-breaking handle, Colorado March Madness betting will reach new highs.
That $125 million in NCAA basketball will be almost a quarter of the projected $529 million in total handle during March. That will lead to an estimated $1.5 million in tax revenue from March sports betting. Further, an estimated $363,000 of that tax revenue is expected to come from NCAA basketball alone.
March Madness is traditionally the last month of a sportsbook’s busy season. It’s the last major event after the Super Bowl and before the next NFL season.
March Madness outperforms the Super Bowl, too. Colorado’s March 2021 sports betting handle was 13% higher than February 2021. That may not sound like a lot, but that 13% increase was about $34.4 million.
Colorado’s latest peak season has already seen large growth, too. For example, December 2021 handle was 62% higher than the previous December’s handle. Bettors wagered $177 million more in December 2021 than they did in December 2020.
So, explosive growth has already occurred. We’re just projecting that March 2022 will perform similarly to a peak season that is much larger than the previous peak season.
Based on Colorado’s past performance and patterns across more mature markets, we expect March to be one of Colorado’s most active sports betting months.
Nerd Box: How We Projected Colorado March Madness Betting Revenue
We started by taking an average of Colorado’s peak season from September 2020 to March 2021. Then we calculated how much higher March 2021 handle was than the peak season average. The average 2020-21 peak season handle was about $261 million, and March’s handle was about 15% higher than that.
So, we applied that same rate to the current peak season to estimate March 2022’s total betting handle. That got us to a projected $529 million in March 2022 handle.
According to Colorado’s March 2021 sports betting revenue report, NCAA basketball comprised 23.8% of the total handle. We used that rate to extrapolate NCAA basketball handle from the total handle. That got us from $529 million in the total handle to a projected $125 million in NCAA basketball handle.
From there, we took Colorado’s average sportsbook hold to arrive at sportsbook revenue. Over the last 16 months, Colorado’s sportsbooks’ average hold was 6.51%. That got us to an estimated $8.1 million in taxable sportsbook revenue from NCAA basketball.
Finally, we took an average tax rate from Colorado’s gross revenue to estimate tax revenue from NCAA basketball. We came up with an adjusted tax rate to account for the varying amounts of money that Colorado sportsbooks write off in promotions each month.
Over the last 16 months, tax revenue was an average of 4.37% of sportsbooks’ gross revenue. Colorado taxes sportsbook net revenue at 10%. But taking an average tax rate from gross revenue allowed us to account for those monthly changes in our tax revenue projection.
We applied our 4.37% adjusted tax rate to projected gross revenue from NCAA basketball and arrived at an estimated $363,000 in tax revenue resulting from NCAA basketball alone.