Now that the U.S. Supreme Court has allowed states to legalize sports betting, a group of sports wagering experts at GiGse Miami had a suggestion for Congress – stay out of it.
The justices ruled in May that the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional. The decision changed the landscape with state legislators exploring laws that would set the legal framework in place for sports betting.
The sports leagues long opposed a repeal of the 1992 federal law that would overturn the ban of single-game wagering outside of Nevada. Now that it has been, they want Congress to get involved set up a uniform national framework that includes guaranteed compensation to the leagues, rather than dozens of individual states approving their own regulations.
Moderator Ewa Bakun, head of industry and engagement for Clarion Gaming, asked if there was any benefit to a federal framework.
“No, but if you come at it from a league perspective than yes,” said Chris Grove, managing director with Ellers & Krejcik Gaming. “You can also make the argument that the federal framework might hurry the process in a small handful of states. There are arguments from our industry, and I don’t see any clear upside from federal intervention.”
Joe Asher, CEO of William Hill US, said he doesn’t see any benefit for the leagues to have a federal framework overseeing sports betting.
“Why do these guys want to be regulated by the federal government?” Asher said. “Look at what (President) Donald Trump did with one tweet to the NFL. What a massive storm he created by going after the guys on the field and why would they want to subject themselves to that. They have the anti-trust protections in MLB. I wouldn’t want to step one foot in Washington other than going to the Capitals game (in the Stanley Cup Finals) on Saturday night.”
Grove said the leagues’ push for federal intervention is the bogeyman to get more leverage on the state level. He called it the “federal mirage” because they are negotiating in a tight window at the state level.
“The leagues are behind in some but not all states, and they use the threat of federal intervention to close some of that gap,” Grove said.
Nick Menas, vice president of strategy and government affairs with the Stars Group, said the goal of the leagues is to figure out a way to collect a portion of the wagering revenue, either through an integrity fee or some other payment.
Several states were targeted, he said, to discuss the integrity fee as leverage. In other words, Menas implied, the gaming industry need to “go along with our fee or cut us in for a piece of the action on the front end.” Menas said the leagues would create a “regulator mess at the federal level with the bureaucracy and hearings that will impact” gaming operators.
Grove said the size of the legal and illegal betting market isn’t as big as people and lawmakers around the country perceive.
If 50 states had regulated markets with retail and online betting, that would be $16 billion in annual revenue. Grove said there’s about $60 billion in the black market (illegal) sports betting handle, which is lower than many estimates that put it at hundreds of billions. He said that $60 billion is worth between $2.5 billion to $3 billion in revenue, and the goal of policy is to capture as much of the black market as possible.
“There’s a lot of potential but once you start to slice down what states will do and taxes rates and license fees, that number gets dramatically lower in a hurry,” Grove said.
“Realistically by 2023, the market will be worth $6 billion spread over 32 states, and that is a mix of both retail and online.”
It would likely start off with a 50 percent split between retail and online but that would grow to 70 percent to 30 percent in favor of mobile betting, Grove said.
The United Kingdom did $5.3 billion in revenue in 2017 and half was online, Grove. The per person spend a year was $58.
Menas said the results will depend on what states do. Pennsylvania has a $20 million barrier to entry and its tax rates make it challenging, he said.
He added that states need to be careful on how they allow people to sign up for sports wagering. Nevada requires in-person registration, which has an impact and reduces the amount of mobile wagering.
As sports betting unfolds, Grove said operators with the broadest market and suppliers with the best relationships with those operators, will be successful. Data companies and media companies who own sports betting customers will also do well.
Asher, whose company operates more than 100 sports books and sports betting kiosks in Nevada, the pie will be large enough for everyone to have a piece.
“There will be a lot of opportunities for innovation and people can come in and nail down their little niche and create something and turn it around and sell it to others in the industry,” Asher said. “The folks who stay focused on what they do best and focus on that one thing and monetize that will be very successful.”
