Maryland, South Dakota, and Louisiana have joined 21 other states in legalizing sports betting. For big names in the industry like FanDuel and DraftKings, this represents a windfall and an exciting new chapter in the legal sports wagering market.

Louisiana

Voters in Louisiana approved a sports betting proposition on their ballot this past week. This marks the first such move in the state towards a change in the law.

The gambling industry in the state is moving quickly to get the first sports book up and running. Plans have already begun at L’Auberge Casino. “It’s where our guests could come, place their wagers, watch games, enjoy some food, and relax. We would build out a whole new section for that,” said Kim Ginn, the General Manager of L’Auberge Casino. She went on, “It’ll go in the legislative session starting in April. Once it’s made into law, then rules have to be made by the Louisiana Gaming Control Board, which controls us.”

The state legislature approved the bill early in 2020 to add the sports betting question to this year’s ballot. The final tally saw fifty-five out of Louisiana’s sixty-four parishes voting for the measure. However, it will be some time before the first wagers are cast. Mike Noel is the Lieutenant Colonel for the Louisiana Gaming Control Board. He doesn’t believe residents will see open sports books opened until at least 2022. “It’s just the way the process works. The legislature has to lay out the framework, and then the rule-making process is a four to six-month process. Once that happens, the entities that wasn’t to participate will have to apply and get licensed,” says Noel.

Maryland

Maryland voters responded positively to question 2 on this year’s ballot, approving the expansion into legalized sports betting. Maryland’s ballot measure added the proposition that revenue generated from the sports gambling industry would be funneled primarily into the state’s public education system.

The measure passed with nearly 70% approval in the state. In addition, the Maryland legislature has expressed near unanimous support including Governor Larry Hogan.

“Question 2 provides a critical revenue source for public education without raising taxes on families and businesses. This initiative builds on the very successful ‘Hogan Lockbox,’ which puts casino revenues in a lockbox dedicated to education. We are already funding our K-12 schools at record levels, and this is another way to ensure that is the case for years to come,” says Governor Hogan.

Maryland State Senator Craig Zucker posits the new sports gambling measure could bring in millions to the state education coffers. “The lowball assumption is that Maryland will get an additional $20 to $40 million in additional revenue from sports betting,” says Zucker.

South Dakota

Constitutional Amendment B will bring sports betting to Deadwood, South Dakota. Nearly 60% of South Dakota residents approved the measure to authorize sports betting in both Deadwood and the state’s Native American reservation casinos.

“Obviously, we’re encouraged by this. This is pacing a little bit better than we did in 2014 with craps and roulette,” said Mike Rodman. Rodman is the Executive Director of the Deadwood Gaming Association. He went on, “we’re thankful to the voters of South Dakota for giving Deadwood this opportunity. We will reach out to the administration to see if they want to start working on some draft legislation for the 2021 session.”

The state constitution currently authorizes Keno, craps, roulette, slot machines, and limited card games in Deadwood casinos. The recent ballot measure now allows the state Legislature to include sports wagering as yet another form of gambling in Deadwood.

The voters in Maryland will see a ballot question in November regarding the legalization of sports betting. Question 2 will state plainly, “do you approve the expansion of commercial gaming in the State of Maryland to authorize sports and events betting for the primary purpose of raising revenue for education?” If the ballot measure should pass, the Maryland legislature will work to lay out a framework for the industry in the new year.

Senator Craig Zucker of Montgomery sponsored the recent legislation. “I feel like we would have had a more comprehensive piece of legislation to present the voters had a global pandemic not happened.” He went on, “we just made a judgement call to get it on the ballot and allow voters to have their say.” The legislation he proposed included mobile wagering as well as brick and mortar sports betting instillations. His bill passed the state Senate unanimously however, the House was only able to approve a paired down version before the legislative session was ended early due to the Covid-19 pandemic. Senator Zucker expects that the mobile gaming issue will ultimately be approved. “I can’t imagine a scenario where we wouldn’t allow mobile betting. Eighty to ninety percent of sports betting is done online.”

Specifically For Education

Industry experts have estimated that legal sports betting could raise annual revenues for the state of roughly $20 million. Both the legislation and ballot question itself specify that these funds would be set aside for state education initiatives.

“Given the horrific economic impact of Covid-19, any additional revenue that we can get that would help toward education is important,” said Senator Zucker. This is a key time for the state to be raising education funds. Just this past March, the state legislature passed the Blueprint for Maryland’s Future, a bill aimed at education reform in the state. The bill was comprised largely of recommendations by Maryland’s Commission on Innovation and Excellence in Education. Unfortunately, the economic downturn associated with the Covid-19 pandemic put pressure on lawmakers to keep spending down. Governor Larry Hogan vetoed the multimillion-dollar bill in Spring of this year.

Not all lawmakers were behind the bill. Delegate William Wivell voted against the sports betting legislation and was one of only three legislators to do so. “The legislature has a spending problem, and the amount of revenue that’s going to be generated by sports betting is not going to bail them out of that problem,” said Wivell. He also expressed concern about widening the scope of gambling within the state. “I just think at some point we have to set limits on what we’re gambling on. We don’t have to bet on everything.”

A Growing Trend

Sports betting is a major industry in the United States and several states have taken active measures to bring the practice under a legal framework. New Jersey, Pennsylvania, West Virginia, and Washington D.C. have legalized sports betting as has Delaware and Virginia. Many in the state of Maryland do not want to be left behind and lose out on beneficial state revenue streams. “I hope Maryland voters approve this, because if we don’t get this done in November, by the time voters have an opportunity to vote on it again, maybe 75% of all states in the U.S. will have sports betting up and running,” said Senator Zucker.

Tennessee approved three sports betting licenses at the end of September and looks on track to bring a sports betting market to the state before the end of the year. The Tennessee Education Lottery Board’s Sports Wagering Committee is charged with processing license applications. The Committee has conditionally approved licenses for BetMGM, LLC, Crown TN Gaming, LLC which owns DraftKings, and Betfair Interactive U.S., LLC which owns FanDuel.

In addition, the Sports Wagering Committee approved a number of licenses for suppliers and vendors, bringing the count well past 30 and giving the Tennessee sports gambling market a healthy diversity of online sports gambling options. The Sports Wagering Committee is scheduled to convene again in mid-October in order to review more applications and digest feedback from the sports betting operators that have already been issued licenses. There is currently no limit to how many licenses can be approved. Every license holder will be required to adhere to strict guidelines as set down by the Tennessee Education Lottery Corporation which is responsible for regulation of online sports wagering in the state.

Concerns had been expressed about how disruptive getting the industry up off of the ground in Tennessee would be. “I think people in Tennessee will be very familiar with the companies based on the fantasy sports side of things.” Brian Pempus is an industry expert from New Jersey and works for one of New Jersey’s online gambling platforms. He has seen all three operators succeed quickly in the New Jersey market and in other legal sports betting states across the country. He went on, “it was a very seamless transition for them to go into real money traditional sports betting.”

Legislative History

Online sports betting was legalized in Tennessee on July 1, 2019 despite opposition from Governor Bill Lee and by a very narrow margin in the state legislature. He stated that he did not believe that, at this time, passing online sports wagering legislation was “in the best interest of the state.” The Senate passed the bill with a vote of 19 to 12 and the State House of Representatives passed it 58 to 37. Yet the industry is estimated to bring in roughly $50 million each year into state coffers. That is much needed state revenue that will be set aside for education initiatives, local government budgets, and gambling addiction treatment programs.

New Territory

However, like many states that have recently passed sports betting legislation, they have yet to see their first bet. The state does not have brick and mortar gambling venues so the online market will be a first for Tennessee.

In April of this year, the Lottery Board approved rules and guidelines to govern the sport. The process was lengthy, taking several months and seeing the creation of the mandated, nine-member, Tennessee Education Lottery Corporation and an advisory council. Currently the state law allows online sports wagering in a number of ways including, via the internet, mobile devices, and telecommunications. Patrons will be required to be physically located in the state and at least 21 years of age or older.

In the wake of legalization, Virginia legislators have presented a draft of the sports betting regulations for public comment. There has been a significant rebuttal from online sports betting platforms such as FanDuel and DraftKings. The companies see some of the proposed regulations as untenable and unrealistic in the current sports betting climate.

In early 2020 the Virginia Legislature legalized sports betting within the state (HB 896). The bill empowered the Virginia Lottery to approve no more than twelve sports betting licenses to both brick and mortar locations like Colonial Downs and online based platforms such as DraftKings. In a review done by the Joint Legislative Audit and Review Commission on the profitability of online sports wagering, the commission estimated that tax revenue could be as high as $55 million per year.

The purposed regulations have now entered the public review phase. This period will determine how quickly legal sports betting is introduced to the state. But it will also shape the form that sports gambling takes in Virginia and several operators have expressed their concerns.

Advertising to Consumers

Under the current draft of the regulations, platform operators will be required to submit their advertising materials to the state lottery for prior approval. Marketing and promotional material will also need to be approved before platforms can deliver it to consumers. The aim is to prohibit sports betting platforms from branding content specifically tailored to minors.

The regulations would also prohibit advertising on any media that itself caters to minors. However, they do not specify which platforms specifically fall within the rule. Many sports betting platforms have countered with an offer of prior notice to the lottery rather than formal prior approval.

Penn National Gaming is not alone in seeing this formal ad review requirement as exceedingly burdensome. “By mandating an approval process for all advertising efforts, this will impact the ability to get promotions quickly posted, which is extremely important given the fast-paced nature of sports (e.g. playoff series being extended),” the company wrote in response to the proposed regulations.

The Olympics

Although not included in the legislature’s bill, the regulations include a provision which prohibits sports betting on the Olympics. The bill itself does prohibit betting on college sports games that involve Virginia schools. But the issue of gambling on the Olympics was left up to the Virginia Lottery to determine. Sports betting platforms, such as DraftKings, have expressed significant concern.

Their argument is plainly, to exclude certain sports defeats the purpose of legalizing sports betting. “In order to fully eradicate the illegal market, the legal market must be able to compete, which means including as wide an array of event and betting options for consumers.” DraftKings went on, “the International Olympic Committee is an international sports governing body that ensures integrity across the events it oversees and, as such, the board can be assured events comport with ethical standards.”

Displaying Odds and Handles

The proposed regulations are written to create a so called “Sports Bettors Bill of Rights.” One of those rights would require the various sports betting platforms to display the real time odds of winning a bet including how those odds were determined, the total amount wagered, and pay out amounts. Operators argue that sports betting odds differ greatly from the mathematical odds in other forms of gambling such as the lottery, card games, or dice based games.

Top sports betting platforms, such as DraftKings and FanDuel, gave significant pushback. Such regulations would be a first in any U.S. state to make sports gambling legal. “Sports betting apps are simply not built to provide and display this type of information,” wrote FanDuel in response to the proposed regulations. The company offered a recent example of an NBA Playoff game with twenty-four types of bets a customer could place. That gave a gambler more than 300 possible outcomes with an incalculable number of potential parlays. The processing power and screen space needed to display that information in real time could create huge logistical challenges, FanDuel wrote.

“As such, this requirement would force a re-engineering of the products, to create a demonstrably worse user experience, and all to provide information which is immaterial to the calculation of the odds and/or payout a bettor will receive.” FanDuel went on, “the actual odds that the Brooklyn Nets will beat the Toronto Raptors, and by how many points, is unknown.”

Consumer Exclusion Safeguards

The proposed regulations layout a detailed process by which consumers can voluntarily exclude themselves from sports betting if they feel they are becoming addicted and losing excessive amounts of money. The individual can ban themselves for periods of two years, five years, or for life. The self-identified addict would simply need to provide information such as address, date of birth, social security number, and description of their physical appearance. However, platforms have argued that the process is filled with flaws.

If a self-identified addict is found to have gambled on one of the various sports betting platforms, the platform is required to “seize the individual’s winnings and other things of value.” FanDuel responded, “it would be no more appropriate to require permit holders to seize the funds (not ascribable to winnings) in an individual’s account, any more than it would be for a casino operator to seize all the money in a self-excluded individual’s wallet if they were found to have entered the casino.”

The proposed process also requires a self-identified addict to ban themselves by going to the betting apps rather than through the lottery site. In addition, an individual who would like to ban themselves for life would need to appear in person. “This is akin to requiring an individual to enter a casino in order to ban himself from a casino,” said a representative from Caesars Entertainment.

The self-exclusion process would allow an individual to cancel their current bets and receive a refund. This has operators concerned that gamblers could use the process to get out of high-risk bets. Penn National Gaming wrote, “a patron may have a future wager on a team to win the Super Bowl, as soon as they know the team will not make the playoffs, they self-exclude in order to get a refund.”

Upcoming

The public comment period for the proposed regulations ended last week and the Virginia Lottery is scheduled to convene to discuss finalizing the regulations this week. Once the regulations are in place, the Lottery will begin accepting applications for sports betting licenses.

Due in large part to the economic effects of Covid-19, the state of New York has seen a marked drop in income tax revenues. In addition, gas, sales, and just about every other business and personal tax base have slipped as well. Online sports betting may be the solution the state is looking for to increase revenue in light of the current economic climate.

Assemblyman Gary Pretlow, Democrat from Westchester County and lead sponsor in the Assembly for an online sports betting bill stated, “it’s going to happen.” And he is not alone. Supporters of an online wagering bill in New York say that this is the moment to push for legalization after years of effort. As lawmakers return to session in the hopes of balancing the 2020 budget, proponents look forward to a move towards legalization of online sports betting.

However, the issue is far from settled. Governor Andrew M. Cuomo has been firm in his belief that such a move towards legalization cannot simply be passed by the state’s lawmakers. Rather, legalization would require ratification through a multiyear constitutional amendment process; including a statewide referendum by New York residents. State lawmakers also share concerns that the proposed revenue sharing plan allows gambling institutions to make too much profit at the expense of funds that could otherwise be used towards the state budget. Others are concerned that the state already holds too many opportunities for gambling. “How many times have we heard that gambling is going to be good for state revenues? We OK’d casinos and then they ran deficits,” said a state lawmaker on the condition of anonymity.

How They Plan to Make it Happen

Revenue-raisers or tax hikes have been the subject of talks to reconvene lawmakers in an attempt to reduce the state’s roughly $13 billion budget deficit. Those talks include the possibility of raising taxes on the wealthy and some state corporations. The alternative would be to cut funding towards public schools, healthcare services, and nonprofits which provide critical state services.

The decision will turn in large part on the outcome of talks at the federal level as to how much unrestricted money will be released to states like New York. If Republicans and Democrats in Washington, along with President Trump, can find a way to provide more federal money to states, New York may not be forced to turn to other revenue enhancements such as new taxes or cut spending.

While sports betting is legal at brick and mortar locations in New York, all, except for Native American casinos, are currently closed under the state’s response to Covid-19 public health concerns. Here lies the advantage in permitting online sports gambling. Even with the limited MLB and a an altered NBA season, online sports betting has the potential to generate huge revenues on everything from cricket and soccer, to darts.
Both the state Assembly and the Senate held sessions last week but did not decide on the online sports betting issue. There are three potential outcomes that residents could expect.

First, state lawmakers could decide to vote on the issue this year under the guidelines of a constitutional amendment. If passed, the decision would need to be reaffirmed in 2021 and then voted on by the state’s residents in November of 2021. However, the deadline for such a move was early August and no plans have been made to reconvene the Legislature for this year. So, the earliest that residents would likely see a ballot question would be November of 2023.

Second, lawmakers could pass a revenue enhancement bill in the coming months which includes legalization of online sports betting. A similar move was seen last year when Senate Democrats issued a nonbinding political message approving mobile sports betting. State Senator Joseph Addabbo, a Democrat from Queens, took this as a good sign and favored the decision not to take the route of constitutional amendment. Both Sen. Addabbo and Assemblyman Pretlow see the amendment process as unnecessary and costly as opposed to a bill’s legal efficiency. They are comfortable accepting the constitutional amendment process as a strong second option should Governor Cuomo decide to veto a bill from the Legislature.

Third, lawmakers could simply pass on the issue altogether. Many in the state’s Assembly see other revenue building plans as more comfortable and less of a moral quandary.

In the coming weeks and months, as the revenue gap widens, lawmakers in New York will see more pressure to act and get the deficit under control.