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Gaming Expansion Approved In Five States: What It Means

Experts also speculate on which states are next to add sports betting

John Brennan by John Brennan
December 7, 2020
in Regulation
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A generic Zoom meeting. Not the actual panelists! (Shutterstock)

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U.S. gaming industry enthusiasts likely already know that voters in all five states that featured significant gaming-related ballot questions on Election Day expressed their approval.

But last week, a Betting on Sports America panel featured three experts offering their analysis on each. Their overall thoughts also addressed the possible impact of the Biden administration on federal oversight of sports betting and a few predictions on when new gaming will expand around the U.S.

Chris Cylke, senior vice president for governmental affairs for the American Gaming Association, said that he was “not surprised at all” that the measures went undefeated.

“We’ve been doing a lot of research on consumer sentiment, and with the public in general, nearly 9 in 10 adults view casinos as an acceptable form of entertainment,” said Cylke in response to a question from moderator Jennifer Roberts, general counsel for Wynn Sports Interactive.

Cylke, who added that about 70% of the public views the gaming industry as well-run, said that the success of Pennsylvania and New Jersey gaming expansion as well as fiscal problems created by the COVID-19 pandemic mean more expansion is on the way.

“Legislators are going to be looking under every couch cushion to find additional sources of revenue,” said Cylke. “And lawmakers are becoming more comfortable with iGaming after seeing the success of sports betting in terms of revenues and consumer protection.”

Colorado in ’19 was the outlier

Andrew Winchell, director of government affairs at FanDuel, said he was “a little surprised” at the clean sweep by voters after Colorado residents just barely passed a referendum to legalize sports wagering in November 2019.  But he noted that the clumsy wording of that measure — seemingly indicating that a “yes” vote was a vote for higher taxes — clearly impacted voting sentiment.

“The fact that voters in multiple states approved with over 60% shows just how much the public is now more accepting of gaming,” Winchell said.

The pandemic also will likely prompt lawmakers to look at mobile sports betting and online casino gaming in a new light, he said.

“You look at states like New Jersey, where operators were still able to collect revenues [while brick-and-mortar visits were prohibited], while in other places that just dried up,” Winchell said, adding that even post-pandemic, weekly gaming data shows that in poor weather players stay home but still take their shot at jackpots online.

For Wall Street gaming analyst Andrew Zarnett, a managing director at Jeffries LLC who has been monitoring the industry for more than 25 years, the current theme is a familiar one.

In the 1990s with casino measures, “the wave was very dependent on whether a neighboring state was offering [such gambling] already — if so, there was a much greater likelihood of approval,” Zarnett said.

“Now we’re going to see sports betting leading out ahead of online gaming [expansion], which also will occur in the next two to three years,” he added, with the pace of online gaming “happening a lot quicker because states need the money.”

Zarnett warned, however, that the one thing that could slow the tide is if lawmakers fail to make efforts to provide support to compulsive gamblers.

Maryland, Virginia join in on the action

Maryland was one of those states with a 2-to-1 margin in favor of gambling expansion, with voters approving both brick-and-mortar and mobile sports betting.

Zarnett said that he expects the state’s six commercial casinos as well as its racetracks to each be permitted “multiple skins” for mobile sports betting apps, making it a relatively competitive state, which industry observers tend to view as better for consumers.

Cylke pointed out that a unique provision in the Maryland referendum requires that a “disparity study” first be conducted to determine whether women or minorities face a systemic disadvantage in opportunities to participate in the industry.

“That could slow down their launch, but they are motivated and want to get going as soon as possible,” Cylke said.

One reason for that is that voters in neighboring Virginia endorsed the opening of four casinos, with mobile sports betting coming far sooner.

Winchell said that Virginia’s plan to follow in Tennessee’s footsteps with mobile gaming puts the pressure on Kentucky as another possible domino to fall due to competition.

“We’ll see if this development gives [Kentucky legislators] the impetus to finally get over the hump and be more aggressive,” Winchell said.

Zarnett said that in Virginia, “we know who the casinos operators will be, and that they need to spend $300 million minimum. That part is done.”

Given typical casino construction timelines, he said that grand openings in several Virginia cities are “probably in 2023, maybe late 2022.”

Zarnett pegged fall 2021 as a real possibility for Maryland sports betting’s launch, which figures to be months behind Virginia’s likely Q1 2021 kickoff.

The Pelican State

Voters in nearly every parish in Louisiana approved legal sports betting, just as they did two years earlier with daily fantasy sports. But the latter has stalled at the regulatory phase, so sports betting may not be a quick “hit” either.

But those approvals, to Zarnett’s point, will be noticed in neighboring states. Cylke noted that in Mississippi, so far “mobile legislation hasn’t gotten anywhere, as [lawmakers] seem to prefer a retail-based market.”

Still, Tennessee’s recent launch of mobile sports betting as well as Louisiana’s clear intentions “puts some additional pressure” on influencers in Mississippi.

Zarnett, who predicts a 2022 launch for Louisiana sports betting, has another border in mind.

“My biggest takeaway on acceptance of [additional] gambling in Louisiana is that it puts incremental pressure on Texas,” he said. “There’s a border up and down Louisiana, and the [Texas] governor has already been thinking about this.”

Winchell said he expects Louisiana to tie sports betting operations to brick-and-mortar casinos and that the potential for mobile in that state now exists. The “2021 football season,” he said, is a realistic goal for proponents to put down their first legal bets.

SD, NE say “me, too”

South Dakota’s approved referendum appears at a glance to permit sports betting only in the tourist town of Deadwood.

“But it’s possible that South Dakota could consider something along the lines of New Jersey, with servers located in Deadwood just as servers are located in Atlantic City,” Cylke said. “Mobile betting is consistent with their constitution.”

Zarnett said in South Dakota, “the real question is what access native American tribes will have” to sports betting.

Moving on to Nebraska, Winchell explained that voters there passed three separate measures.

“My gut reaction is to wait and see what the new gaming commission interprets in whether the approvals include sports betting,” Winchell said.

That’s because the referendum addressed “games of chance” — which does or does not include sports betting, depending on the state. Cylke said Nebraska “might need another referendum” to clarify the issue.

Zarnett drew on his experience to illustrate the unusual resistance Nebraskans have to legal gambling.

“There has been [casino] gaming in Council Bluffs, Iowa — which is effectively Omaha — for at least 20 years,” Zarnett said.

Federal sports betting intervention possible?

Cylke said that media speculation about whether incoming President Joe Biden might endorse federal sports betting legislation is “a leap,” especially given that such legislation backed by New York Sen. Charles Schumer and former Utah Sen. Orrin Hatch “has not gone anywhere.”

And with 26 states having passed sports betting laws, Cylke said that means a majority of U.S. senators have constituents who are getting used to state regulation instead.

“There would be a lot of hurdles to enacting any sort of framework,” Cylke added. “The idea of [Biden] spending political capital in getting something done that we believe to be ‘a solution in search of a problem’ is highly unlikely.”

Winchell said that in the past two decades or more, about 40 states have approved some sort of marijuana reform, yet the federal government has not taken over management of that “former vice,” either.

What’s next in gaming?

Which states are next on sports betting?

Cylke mentioned Ohio and Massachusetts first since their legislative sessions remain active this month. After that, the AGA executive listed Kentucky, Georgia, Oklahoma, and Missouri.

Zarnett again tantalizingly mentioned Texas potentially “dipping their toe in the water” of gambling in the next five years — starting, he added, with sports betting.

Winchell said he would not be surprised if “within five years, 35 or 40 states have authorized mobile sports wagering.” The former New York legislative aide also pointed to the Empire State and North Carolina as key sports betting states that may be on a path to adding mobile wagering to the mix.

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John Brennan

John Brennan

John Brennan has covered NJ and NY sports business and gaming since 2002 and was a Pulitzer Prize Finalist in 2008, while reporting for The Bergen County Record.

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