Missouri’s foray into legal sports betting began with a bang in December, but the state’s coffers saw surprisingly little return. More than $543 million in bets were placed during the first full month of operation, yet a combination of aggressive promotional spending by sportsbooks and constitutional provisions designed to protect against losses resulted in a net negative revenue of $20.8 million, meaning no tax dollars were allocated to education, as proponents had promised.
The legalization of sports betting in Missouri, approved by voters in November 2024 by a narrow margin of just 2,691 votes, was heavily championed by groups like Winning for Missouri Education, who estimated the measure would generate $100 million in tax revenue over five years. However, the constitutional amendment included a caveat: funds would only be directed to education after operators deducted expenses and contributed to a compulsive gambling prevention fund. Critically, the language also allowed for the possibility of no revenue reaching schools if taxable revenue proved insufficient – a scenario that played out in December.
The primary culprit behind the shortfall was the intense competition among sportsbooks to attract customers. Companies like FanDuel and DraftKings engaged in a costly promotional war, writing off a combined $125.1 million in free-play wagers. FanDuel alone accounted for over $53 million in promotional credits, while DraftKings offered $48.5 million. These free bets, as stipulated in the amendment, are exempt from taxation.
Ryan Butler, senior news analyst at Covers.com, explained that this initial period of losses is a common rollout strategy. “The best way to look at it is per capita spent in the biggest population, and Missouri’s was pretty stronger than North Carolina, which is the most recent comparable one,” Butler said. He also noted the success in capturing bettors who previously crossed state lines to place legal wagers. “That excitement was fueled by costly promotions…The free bets were pretty ridiculous, where it was if the Chiefs or Texans score a single point in their game, or if the Blues have a shot on goal. The promos were very expensive and What we have is common.”
The Missouri Gaming Commission’s report revealed that total deductions, including payouts and free play, reached $563.8 million, exceeding gross revenue and resulting in negative adjusted gross revenue. This effectively eliminated any tax collection earmarked for education.
Butler emphasized that sportsbooks anticipated these early losses, viewing promotions as a long-term investment in customer acquisition. “It’s an investment. It’s what they call a customer acquisition tool,” he explained. He pointed to the experience of MGM, which initially lost billions on similar strategies before turning a profit of $250 million last year. “They made $250 million last year.”
Despite the disappointing initial results, Butler predicts a shift in the coming months. “There were no taxes basically that’s because of all these free bets and promos. But that is going to change,” he stated. “We’re going to see it stabilize really beginning this month. Next month, there will be less betting handle, there will be less bets placed, but there’s going to be more taxes generated.”
Missouri’s launch came a year after missing out on revenue during the Kansas City Chiefs’ Super Bowl run in 2024. GeoComply data showed 431,000 attempts by Missouri devices to place legal bets in other states, with nearly half targeting Kansas sportsbooks. Kansas, in turn, saw a significant increase in revenue during the Chiefs’ playoff runs, collecting approximately $600,000 in 2023 and $1.7 million in 2024.
Looking ahead to this year’s Super Bowl, sportsbooks are bracing for substantial activity. Johnny Avello, DraftKings’ head oddsmaker, told ABC 17 News, “It’s two teams vying for the championship of the most popular sport betting sport in America…That’s when some of the big bets and the big money comes in. Probably only 20% has been written, then there’s about 80% to go.” DraftKings, like other operators, is offering significant promotions tied to the game, including a $4 million prize pool for bettors who correctly predict the player with the longest touchdown.
However, Missouri’s regulatory framework is more restrictive than some other states. The Missouri Gaming Commission declined to approve certain novelty prop bets, such as those related to the coin toss or the color of the Gatorade shower, citing concerns about potential manipulation. “Missouri won’t do coin toss, they won’t do Gatorade, they won’t even do some on-field ones,” Butler said. “The idea behind states such as Missouri that ban this is fear of manipulation.”
The initial results in Missouri highlight a broader trend in the rapidly expanding sports betting market: the high cost of acquiring customers. The state’s experience raises questions about the long-term sustainability of revenue projections and the need to strike a balance between market growth, responsible gaming, and funding for essential public services.
