'Absolute blessing': Sports betting revenue a game-changer for smaller UNC System athletic departments

The legislation, passed in June, creates a new revenue stream for 13 athletic departments across the state from the state's cut of tax revenue paid by the operators. The University of North Carolina at Chapel Hill and North Carolina State University, members of the Atlantic Coast Conference and with budgets exceeding $100 million, are not included in the law.

The revenue would be a lifeline for many smaller athletic departments in the state, which are seeing rising costs and struggling to keep up.

"The projections they've outlined would obviously be a significant impact for us," said Dick Christy, the athletic director at UNC-Pembroke, an NCAA Division II university with an athletic budget of about $5 million – or 3.5% of the $139 million athletic budget at its sister campus in Chapel Hill.

The law outlines precisely how much of the revenue from mobile sports betting is to be allocated. A five-year sports betting operator license costs $1 million and eight operators have been approved to take bets at launch. Operators will pay an 18% tax on gross wagering revenue, which is defined as the amount taken in bets minus the amount paid as winnings before any deductions for expenses, fees or taxes.

Precisely how much tax revenue will be generated by sports betting is conjecture at this point.

Virginia, a state with a similar size population which legalized sports betting in January 2021, provides some context. More than $5.6 billion was wagered on sports in Virginia in 2023, up from $4.9 billion in 2022. The state has a 15% tax rate and allows for operators to take some deductions. Virginia collected $71.8 million in revenue in 2023.

"On a pound-for-pound basis, we expect that North Carolina is going to be one of the better states for sure," said Gary Deutsch, the chief financial officer for BetMGM, one of the eight operators in North Carolina. "There's fervent sports-fan interest. The population of fans for the different colleges down there should make that a big source of excitement."

If the state were to equal Virginia's $72 million in tax collections, the 13 North Carolina athletic departments that are eligible to benefit from the revenue would receive roughly $1.2 million each.

Here's how the math works:

The first $8.4 million in tax revenue is allocated to:

After that, 20% of the remaining revenue would be distributed to those 13 athletic departments, 30% would go to the newly created North Carolina Major Events, Games, and Attractions Fund, and 50% to the state's general fund.

The current page does not support this embedded media. To view this story with fully functioning media, please visit this page on our full site.

In 2021, UNC System President Peter Hans convened the chancellors, chief financial officers and athletic directors at smaller universities for a brainstorming session on funding athletics.

The focus was this: "What could we do creatively to help create some sustainable funding going forward?" said Janet Cone, the athletic director at UNC-Asheville.

Universities cannot use state funds for athletics, unless they are specifically marked for sports. To deal with increased costs, particularly at colleges in conferences without large television contracts, schools increased student athletic fees.

"How long can you keep doing that?" Cone said.

At UNC-Asheville, its 2,600 full-time students pay a $905 student athletic fee to support the Bulldogs' Division I intercollegiate athletics programs. So Cone and UNC-Asheville pitched a novel idea at the session with Hans and the board of governors.

"If sports betting was the path in the state of North Carolina, including betting on college sports, why couldn't some of those funds come back to our universities to help us with our core mission of providing a holistic student-athlete experience without continually going up on athletic fees," Cone said.

The fee can only be charged to full-time, in-person students. At UNC-Pembroke, where more students have opted to take online programs, that means less revenue from student fees. The athletic department is down about $1 million in fee revenue, Christy said.

That's a big deal at the Division II level where schools can’t count on ticket sales or media rights to erase such a loss. Revenue from sports betting could be a life saver.

"It's an absolute blessing from a timing standpoint to help us get back whole," Christy said.

As sports betting moved through the legislative process, including its 2022 failure in the state House by a single vote, the legislation always included money for smaller colleges, like Asheville, Pembroke and historically Black colleges and universities, or HBCUs.

The list eventually grew to 10, all non-Football Bowl Subdivision programs: UNC-Asheville, UNC-Greensboro, UNC-Wilmington, North Carolina A&T, Western Carolina, UNC-Pembroke, Winston-Salem State, Elizabeth City State, Fayetteville State and North Carolina Central.

It grew again to 13 schools to include Appalachian State, UNC-Charlotte and East Carolina before final passage.

To bridge the gap until sports betting revenue kicks in, state lawmakers included $1 million each for the athletic departments at the initial 10 schools in the 2023-24 fiscal year budget and $700,000 in the 2024-25 fiscal year budget.

In addition, the state budget also allocates $1.16 million for each of the 13 athletic departments from sports betting revenue in the 2024-25 budget. So the 10 initial programs could see close to $2 million for the fiscal year that starts July 1.

"I don't think you've got to be very smart to appreciate the financial impact that our athletic teams have on our economy in the state," said Republican Sen. Jim Perry, R-Lenoir, a chief sponsor of the legislation. "If you've never been to a football game, that's fine. Never been to a basketball, that's fine. But you know that a lot of people do go and you realize that a lot of money circulates in our economy because of that."

Rep. Jason Saine, R-Lincoln, another top proponent of the law, said the revenue was a way to reinvest in sports at the schools.

“If you’ve got a good atmosphere on campuses, people tend to stay,” he said. “The goal is to keep very well educated people in the state. That’s a win for everybody.”

With part of its money, the Department of Health and Human Services is funding the Gambling Research and Policy Initiative at ECU to understand gambling behavior, attitudes and risk.

"Our last study showed that in North Carolina, regardless of if you live on the eastern side of the state or the western side of state, we have a 5.5% problem gambling rate," said Michelle Malkin, the director of the new initiative. "This is really disturbing in the sense that we don't have a lot of legalized forms of gambling in the state."

Rates of problem gambling range from 1% to 8% among adults across the country, Malkin said. According to the National Council on Problem Gambling, 2.5 million U.S. adults are estimated to meet the criteria for a severe gambling problem and another 5 million to 8 million adults are considered to have mild or moderate gambling problems.

“Young males, particularly those with sporting involvement or interests, appear to be particularly at risk,” said Marc Potenza, director at Yale's Center of Excellence in Gambling Research.

Cone said college athletic departments also have an obligation.

“We have to take responsibility for both sides: being good stewards of the money we are going to get and being very diligent about educating student-athletes, coaches, staff and [UNC-Asheville] Bulldog friends about sports betting,” she said.

And some education will start before children step foot on a college campus.

The NC health department is offering grants to middle schools, high schools and other youth organizations to implement gambling prevention curriculum and working with Charlotte Mecklenburg Schools to incorporate problem gambling awareness into seventh grade health curriculum.

"It will allow us to fund different types of activities, to get kids outdoors," said Justin Burr, the commission's executive director. "Our original goal of trying to get kids outdoors now will include athletic activities. It's better than being attached to a screen 24/7."