Abstract
In my 25 years in the gaming industry, I've often said that I didn't think I'd see legal sports betting in the United States in my lifetime. I've changed that view. There's a legal challenge to the prohibition law in the U.S. and the beginnings of a legislative push in Congress. As well, there's a neutralization if not outright support by some of the sports leagues that give one cause for hope.
At a recent conference on the topic in New York City, it was clear that folks were beginning to see enough signs of hope to actually get into the nitty gritty about how legal sports betting could be structured.
But let's start with a little background for the uninitiated. The Professional and Amateur Sports Protection Act (PASPA) was passed by Congress in 1992. It effectively outlawed sports betting all across the U.S. except in a few states which opted in at that time. Some 25 years later, it's seen by many as fairly ineffective in stopping illegal gambling both by the “corner bookie” as well as by offshore operators.
Since that time, the State of New Jersey has filed lawsuits arguing that the law is unconstitutional by not allowing other states to institute legal sports betting (Nevada is really the only state that has full-on legal sports betting). That suit has worked its way up to the U.S. Supreme Court and oral arguments were heard in early December. It's expected that a decision on that case may be forthcoming in April 2018 or thereabouts.
The sports betting conference was the first of its kind focusing strictly on this topic. It brought together representatives from various sports leagues, some team owners and players' representatives, gambling operators, sports betting suppliers, regulators, policymakers, and advocacy groups.
The analysts were helpful in setting the stage on the topic. David Henwood of H2 Capital stated that their estimate of the illegal gambling market in the U.S. is around $196 billion. The American Gaming Association, a trade group, puts that number at $150 billion.
Some 12 states in the U.S. already have put forth legislation indicating that, should PASPA be overturned by the Court opening up the way for legal sports betting, they would take advantage of that opening. There seemed to be general consensus that the number of states doing so might increase to as many as 17 if that happens.
There was some interesting discussion as to whether this would actually eliminate illegal sports betting. There seemed to be no illusion that this would be the case. Regulatory constraints and high taxes will be deterrents for gambling operators seeking a profitable activity. Some pointed to the recent 36 percent tax rate for prospective sports betting activities in Pennsylvania as a deal breaker. Several veteran Las Vegas sportsbook operators echoed that sentiment by attesting to the very small profit margins of the books there. Better pricing by offshore interests, the ability to bet on credit, and required reporting for taxation may well be deterrents for the players who seek the best deals.
There was much discussion about the integrity of the games, and people with monitoring groups outside the U.S. were helpful in bringing facts and experience to the discussion.
Much of the debate was about the role of the states versus the federal government. Some, like the representative of the National Basketball Association (NBA), said that they preferred a federal approach and will begin lobbying for that sort of law in Congress in 2018. At a minimum, some base federal standards could be developed to help guide states as they develop sports betting regulations.
But others seemed resigned to the fact that, given the history of gambling laws being the purview of the states, this would be the likely approach for legalization. An Ohio state senator on a states' rights panel noted that most state legislators “would rather have a root canal” than grapple with gambling legislation. He noted that many constituents are split 50–50 on this emotional topic. How tribal gaming fits into this equation is unknown but a panel on the topic made it clear that tribal leaders expect to be recognized and cut in to the deal.
The organizers' intent was to synthesize a Clarion Accord, a five-point manifesto to guide the activities of the industry in 2018 as the court decision becomes known and lobbying efforts begin in earnest. They came up with the following:
▪ Make consumer protection and long-term health of the player the utmost goal through proactive, considerate, and sustainable Responsible Gaming strategies that encompass impact not just now but in the future. ▪ Seek sports industry's buy-in by providing comfort, through an educational effort, that its commercial, reputational, and integrity goals are fully met. ▪ Action a transparent and inclusive lobbying effort that considers the interests of all stakeholders, both gaming and sports, for a consistent message to policymakers. ▪ Protect the integrity of sports through a regulatory framework consistent across states and enabling full cooperation between sports, gaming, regulatory, and enforcement stakeholders. ▪ Create a sustainable regulatory and taxation environment that instills trust for the consumer, provides revenues to the state budgets, and roots out the illegal market.
Watch this space closely as we monitor both the Court and the legislative efforts on this topic. It will make for some lively debate, regulatory challenges, and, potentially, interesting business opportunities for the industry.