NGCB asking for input; but will they listen?

Jul 10, 2018 3:00 AM

Last week the Nevada Gaming Control Board posted the following notice:

“The Board recognizes the potential impact the United States Supreme Court’s decision in Murphy v. NCAA could have on Nevada’s sports wagering industry. In addition, various divisions of the Board are presently reviewing Regulation 22 (Race Book and Sports Pools) to determine which, if any, regulations need changes. As such, the Board would like comments from the industry regarding changes it feels are appropriate for Regulation 22. Please submit your comments to Chief Karl Bennison at Nevada Gaming Control Board, Enforcement Division, 555 East Washington Avenue, Suite 2600, Las Vegas, Nevada 89101, no later than August 6, 2018.”

In the past when I would read these type of notices, I would chuckle, knowing most of the time the agency had already decided what they wanted to do and were simply following the state’s requirements to notice the industry.

This time though, they might just be listening as to what regulations need to change to accommodate those Nevada bookmakers who are looking to centralize the management of their sportsbook operations, and I sincerely hope they do listen.

Sportsbooks have always been a challenge for regulators – lines made based on opinions; movements made based on recent and expected action and/or changes in team/player information; diverse lines between books – no simple basic math for the reviewing regulators to rely on, so confusing for the inexperienced.

If I were still running properties and had interest in my sportsbook operations going multijurisdictional, I would be looking for the Board and Commission to at a minimum do the following:

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1. Relieve Sportsbooks from Tax Minimization Considerations: Believe it or not, the gaming regulations bar casinos from intentionally losing and thereby reducing taxes due to Nevada. While it seems obvious no gaming operations would intentionally lose money, consider the unique situation of a sportsbook in a multijurisdictional structure.

Casino A in Nevada is a million dollars high on a game and they have sister book in Casino B based in New Jersey that is a million dollars high on the opposite side of the same game. Obviously the two sportsbooks together are balanced, and the company will profit the vig. But one casino will win a million and the other will lose a million.

Since they are in different tax locations one state will score the gaming taxes on the win and the other state will not and provide a deduction of the loss from the book into another gaming revenue area of the casino.

Under normal circumstances, the books would try to self-balance, but in multijurisdictional environments the balancing pressures are different and why this topic should be considered.

2. Allow Revenue Sharing between Jurisdictions: A simple solution to the afore referenced issue would be to allow linked books to share the books’ win on a pro rata basis based on the amounts wagered on the event.

Using the same example as above, instead of one casino winning and one losing, the vig would be split based on the ratio of wagers on the event. In this case 50/50. Both casinos would get a slice of the profits and both states would get a slice of the tax revenue and everybody wins.

3. Require Anyone that Can Influence a Line Movement to be Subject to Nevada Licensure: As the adage “a chain is only as strong as it’s weakest link” is so true, once other books in other jurisdictions linked to Nevada books can affect line movements in their system, Nevada should be able to protect itself by being able to call those persons forward for licensure.

This should, in my opinion, also apply to information service providers as well since the information they provide, and the timeliness of that information, can affect a book’s line and profit results.

There are many other technical topics and accounting topics, like should cash wagers in multiple casinos across different states by the same person be aggregated for currency reporting purposes or if books should no longer worry about where the bet is originating from for online purposes. But those topics are more mechanical in function than policy and Nevada’s regulators should initially decide on the policy and philosophy regarding taxing and protecting multijurisdictional sports wagering.

I do hope though that Nevada takes the lead in this area instead of abdicating it to another state like it did with multijurisdictional online poker a few years ago. This will be a fun one to keep an eye on!