If we’ve learned anything since the repeal of PASPA a year ago, it’s there’s more than one way to allow a person to place a sports bet legally in the United States of America.
Actually, we’ve seen there’s more than one jurisdictional way to make legalized sports betting happen.
You can do it through a gaming or gambling commission. You can do it through a lottery commission. You can do it through a compact with a Native American tribe.
You can do it with or without a Governor’s signature. You can do it by insisting business be transacted in a brick-and-mortar facility. You can have people use a phone app to make a bet. Or you can do both.
But as more states ponder joining in the opportunity to add revenue to their coffers, there’s simply no consensus on how to do it. It’s like looking at a map and seeing several ways to get to the same destination.
Do you follow Nevada’s model, which has strong oversight from its gaming control board and allows people to bet at a sportsbook or on a phone app? Do you let the racetracks partner with a betting company, as is the case in Delaware where William Hill runs the sportsbook at Delaware Park racetrack and in parts of New Jersey with William Hill at Monmouth Park and FanDuel at the Meadowlands?
It’s confusing to say the least. And in trying to make some sense of it all, Jennifer Roberts said that could be tough.
Roberts, the associate director of the International Center for Gaming Regulation at UNLV and an adjunct professor at the school’s William S. Boyd School of Law, said because every state has different ways of turning legislation into law and then providing oversight for those laws, it makes it difficult to gauge what the true growth of the sports betting industry will be in the U.S. in the coming years.
“I expect a few states that have approved sports betting will be up and running by NFL football season,” Roberts said following last week’s International Conference on Gambling and Risk Taking at Caesars Palace. “Many legislative sessions have ended, so we may see more activity in early 2020.”
At the heart of issue is generating funds for the states.
“Revenues are being generated,” she said. “I think you have to take into account the volatility of it. As long as you have that understanding, you can see there are profits to be made. There are revenues.
“But perhaps the more important thing is not just counting on sports betting to provide revenues, but to have sports betting provide a transparent market as far as protections, regulatory oversight, enforcement opportunities against illegal markets. Those are things you don’t have when you have illegal sports betting.”
According to figures from the American Gaming Association, $8.62 billion was bet on sports legally in the U.S. since PASPA’s repeal. Operators have pulled in $580.4 million in revenue, and from that figure, $62.7 million was paid to state and local governments in related taxes.
The sports wagering revenues have fluctuated among the seven states that joined Nevada last year. New Jersey’s projected handle for the Super Bowl was well below the expected number. Same for Rhode Island with that state’s overall projections as the New England Patriots backers in Rhode Island made a killing in the 13-3 Super Bowl win over the Rams in February. But March was good to Rhode Island as the state generated $17 million in handle thanks to college basketball.
Some of the issues are the tax rates states are implementing to get sports wagering operations up and running. In Nevada, the tax rate is 6.75 percent. In Mississippi, it’s 12 percent. In Pennsylvania, it’s a whopping 36 percent while Rhode Island’s tax is more than half (51 percent).
And when you consider the margin for success by a sportsbook operation is so slim (Nevada had a hold of just 5.1 percent in 2017, those taxes can cut into a business’ profit margin.
So Roberts isn’t surprised some states are proceeding cautiously.
In the first five-plus months of 2019, Iowa, Montana, Tennessee, Indiana and Illinois have approved bills and will be getting into the sports betting business this coming year. New York is moving forward with its plan to have sports betting in four upstate casinos by the fall. Arkansas has been working on a plan of its own. Same for Washington D.C., where the lottery commission there will oversee betting on sports. And Oregon is planning to get back in the game after its “Sports Action” parlay card run by the state lottery, went into hiatus back in 2007.
“I think Tennessee is going to be interesting because of the mobile-only platform,” she said of the Volunteer state’s decision to bypass brick-and-mortar operations in favor of phone apps. “I think it’s going to be interesting to see lottery vs. private enterprise operations. “Illinois going to be interesting. Massachusetts, how they’re going to deal with whether to have it at casinos or private operators is something to keep an eye on.”
Roberts spent 85 minutes during her seminar at Caesars on the state of sports betting in the U.S., a discussion that was part history lesson, part Sports Betting 101, part basic legislative law and part math class.
But she kept coming back to the need for integrity and oversight. She remains convinced that state lotteries may not be the best gatekeepers when it comes to booking sports bets. And given the struggles in Rhode Island and in West Virginia where there have been some issues over mobile apps, those two states’ lotteries are charged with overseeing sports betting.
She’s not ready to hand the reins to the feds either. And maybe she’s biased because she lives and works in Las Vegas, but when Roberts points to the Nevada template when it comes to regulation and oversight, it’s hard to argue with her given the state’s track record over the decades.
“Although I understand the benefits of uniformity and information sharing with some federal oversight or framework, however I don’t believe that outweighs the ability of states to properly oversee sports betting,” she said. “First, the federal government has limited experience in actually regulating gambling and it historically always has been a state function. States are equipped with greater resources, such as gambling control agencies and enforcement to oversee commercial activities within their states.
“Second, the federal government adds another level of politicization that could burden effective oversight. For example, would we see political appointment of a sports integrity czar? Do we want to see more politics enter into this space?
“Nevada has been paying an excise tax on handle since 1951 and there is little evidence that such funds were dedicated to cracking down on the illegal market.
“Finally, if the framework is similar to that which was proposed in the Hatch-Schumer Bill, the industry would suffer. The legislation benefitted commercial interests, added significant costs to operators that already operate at low margins and did not even grandfather existing states with legal sports betting so that they would have to seek approval from the U.S. Attorney general to have it.”
Smart lady. And if you’re a state considering passing legislation to allow sports betting, you could do a heck of a lot worse than modeling your operation after Nevada’s.
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