Sports betting not panacea

Feb 13, 2018 3:00 AM

One of my favorite words is “panacea.” It just rolls off my tongue and that’s not because I used to think it was some type of Italian bacon.

Simply put, it’s defined as “a remedy for all ills or difficulties.” A panacea is what various state legislators seem to believe national sports wagering will become later this year if the U.S. Supreme Court, maybe as soon as March, legalizes sports wagering. This space has been used before to explain that many decision makers in the various states considering sports wagering and the National Basketball Association (NBA) have not done their homework on the subject.

Sports wagering following the “Nevada model” is a wonderful thing but is not the revenue-generator the uninformed seem to think it is. It’s unlikely to fill budget gaps in all the states where government continues to spend more money than it takes in. Spending more money than one takes in doesn't work too well for me and I doubt it works too well for you. However, for various states it has become a fact of life. In states with significant gambling tax revenue, the gambling money has become a source of revenue the states cannot live without.

Now, rather than impose new taxes on residents, sports wagering is seen as a new way of closing state budget deficits without raiding the pockets of constituents. Apart from the states eyeing the extra money, the NBA, in particular, has floated a trial balloon asking for what amounts to a 20 percent cut on sports wagering profits generated by its games.

By examining the recent Super Bowl LII wagering data provided by Nevada Gaming Control Board (NGCB), we see gamblers bet a record $158.6 million on the big game at Nevada's 198 sportsbooks, over $20.1 million more than in 2017. But the unaudited tallies by the NGCB revealed sportsbooks made a profit of roughly $1.2 million on the action. That’s about three quarters of one percent. You don't need to be a mathematical wizard to see there was considerable risk and minimal reward.

If the various state government officials take time to listen, they might realize Vic Salerno’s pari-mutuel concept through his USFantasy enterprise may be the only logical path national sports wagering can take. As usual, Salerno, the dentist turned bookmaker and Gaming Hall of Fame member, is well ahead of the pack when it comes to forward thinking and new ideas.

It’s problematical if the “Nevada model” – where most sportsbooks are tethered to casino/resorts where they serve to drive customer traffic in addition to generating what is usually comparatively minimal revenue – would work in other jurisdictions. In England, for example, the “bet shop” model is prevalent in which small storefronts with limited seating capacity offer sports and race wagering. I’m not sure bet shops like that are feasible here.

The NBA has, through recent statements, proposed to become a kind of partner is sports wagering. However, the optimum way for everyone to receive a cut of the revenue involved and eliminate the risk is the implementation of Salerno’s concept of national sports wagering utilizing the pari-mutuel system as employed by the horseracing industry.

As in horseracing, each kind of bet would have a takeout from which every stakeholder – including the sports leagues and the betting enterprise – would take a share. Online sports wagering, often opposed by casino/resorts having a huge financial investment in their brick and mortar operations, would no longer be an issue because if an online player is one of your customers you get your piece of the action.

Thus, all the stakeholders would be joined together in seeking to grow the business because the bigger the betting pools the more money everyone makes. Even just a fraction of a percentage point in the enormous pools would be significant. And, as stated earlier, pari-mutuel pools eliminate all the risk involved in sports betting. That alone should calm the casino/resort bean counters that generally become apoplectic whenever the house suffers a loss.

The pari-mutuel system works for horseracing and can work for sports. Instead of the sports bettor playing against the house, the bettors compete against each other. If you’re right you win. If you’re right and lots of others are wrong, you win more.

I’ll leave it to the negotiators for the parties involved to decide how to split the money. For me, this is clearly the way to go should sports betting be legalized nationally. What could become a crazy quilt of individual state laws or unrealistic federal regulations that crush the business of national sports wagering before it can start in addition to allowing illegal operators to continue to flourish is just not going to work.