An Indiana committee held a nearly five-hour-long hearing on Wednesday evening on a controversial gambling expansion package that is the state’s 2019 vehicle for legalizing sports betting.
The House Committee on Public Policy chewed on the provisions of Senate Bill 552, which cleared the Senate in late February. Earlier in the process, signs pointed to an uphill battle going into the meeting. Then during the lengthy discussion it became apparent that the bill’s odds of passage are up in the air.
Despite allowing for the state’s licensed casino gambling operators to offer sports betting, including over personal computers and mobile devices, the legislation was criticized by some stakeholders as a destabilizer of the Indiana gaming market, particularly in the northwest part of the state.
Sports betting has become the hottest and most-discussed casino gambling offering in the nation following the May 2018 fall of the federal ban, but that actually isn’t the central component of this legislation, which includes a variety of other moving parts and for that reason was labeled by some as a “once-in-a-lifetime opportunity” for the state.
Casino license relocations
The bulk of the debate centered on the Gary, Ind. riverboat casino relocations. The provisions in the legislation would allow one of the Majestic Star casinos to move onto land to a more favorable location in downtown Gary. The other Gary gambling facility could move about 150 miles south to Vigo County, home to Terre Haute. Gary and Terre Haute are both eager for a casino shakeup that would spur investment in their cities.
Around 100 people from Terre Haute traveled to the State House in Indianapolis in an effort to demonstrate the community’s enthusiasm for a new casino. A representative from Terre Haute said the community needs a “lifeline.” Representatives from Gary spoke similarly of their economic plight, which the city believes can be mitigated by a casino relocation and its associated development.
The Vigo County casino license would be selected through a competitive bidding process, a provision that was included so that Indianapolis-based Spectacle Entertainment, the new owner of the adjacent Majestic Star casinos in Gary, wouldn’t have an unfair advantage.
That didn’t cut it for Pennsylvania-based Penn National Gaming, owner of the Ameristar Casino East Chicago sitting just outside Gary. It was said that a casino in downtown Gary could directly siphon off visitors to the Ameristar Casino. Penn National (Penn), Pennsylvania’s first legal sportsbook operator, doesn’t believe sports betting legalization is enough to offset its concerns.
Additionally, the city of Hammond, home to Caesars’ Horseshoe Hammond, opposed the bill out of fear that the shakeup would negatively impact its community. Las Vegas-based Caesars Entertainment supports the legislation.
Spectacle believes the bill is “the right public policy” in its competition with Penn and Caesars, two national casino operators. Spectacle’s only two casino licenses are the Gary riverboat properties, making it a truly local company. The firm tried to stress that point at the hearing.
Full House Resorts, owner of the Rising Star Casino Resort on the border with Kentucky, gave tentative support to the bill, but said that it benefits some of the casino licensees while not doing as much for others. A Full House representative said that the bill doesn’t do a good job establishing a competitive bidding process for the Terre Haute casino. The firm said Terre Haute might find itself “leaving money on the table.”
The French Lick Casino, owned by Orange County Holdings, testified in opposition to the bill in its current form. Boyd Gaming, owner of the Belterra Casino in southeast Indiana and the Blue Chip Casino located near Gary, testified that it has “trepidation” about the Gary shakeup.
Live dealer table games
Penn National also dislikes the bill, saying it would adversely impact its Hollywood Casino Lawrenceburg in southeast Indiana. This has nothing to do with the Gary casinos.
Currently, two racinos owned by Caesars are slated to have live dealer table games in 2021. Those properties — Indiana Grand Casino and Hoosier Park — are in the Indianapolis area, which could diminish visitation to the relatively nearby Hollywood Casino Lawrenceburg. Penn National quantified the impact as a $7 mm annual gaming revenue loss at the Lawrenceburg property.
SB 552 would move up the launch of those games from 2021 to this year, a move that Penn fiercely opposes.
Penn went as far as to label the legislation a “slippery slope” because it believes the sweeping changes to the gaming industry landscape could destabilize the market.
Caesars, owner of four licenses in Indiana, supports the legislation, despite the negative impact that would likely be felt on the Hammond Casino. Caesars’ support doesn’t solely hinge on the table game timeline.
Like the other provisions, the sports betting framework in the bill is also controversial. The legislation would allow statewide mobile wagering and it would also mandate that sportsbook licensees purchase “official” league data.
Under SB 552, the casino industry would be required to use data from the leagues’ third-party suppliers to determine the outcome of in-game wagers. While many sportsbooks already use certain suppliers the league are partnered with, there are concerns about potential price gouging, data monopolies and more broadly, the existence of a legislative-mandated commercial agreement.
That won’t bother Caesars, which has a “casino partnership” with the NFL, as well as the Indianapolis Colts. The partnerships give Caesars a significant advantage in Indiana.
The Colts testified in support of the bill at the hearing, but it was met with some skepticism by Indiana lawmakers who are unsure about the data mandate.
“We firmly believe that the sports betting framework represents quality legislation,” said Dan Emerson, Chief Legal Officer for the Indianapolis Colts. “There is no greater priority than protecting our games.”
Emerson said that Indiana’s sports betting provisions could be a “model” for the other states. One Indiana lawmaker questioned whether Indiana wants to be the first state in the nation with a data mandate.
A representative for the PGA Tour, NBA and MLB also testified in support of the sports betting provisions.
Casino Association blasts data mandate
A group representing 10 of the state’s 13 casinos (which includes the Penn, Caesars, and Spectacle properties) didn’t take an official position on the bill given the varying positions of its members.
Matt Bell, President and CEO of the Casino Association of Indiana, told House lawmakers that his group supports the provision to increase the casino free-play allowance to $9 mm. “This is an extremely effective marking tool, the most effective marketing tool that the casinos have,” Bell said.
The free-play allowance is the amount the casinos can offer to customers before it is taxed.
Bell then touched on sports betting, which the Casino Association supports generally. He said that mobile sports betting is the way to go to deal a blow to the black market sites. However, the group has serious problems with the in-game data mandate, which would (indirectly) benefit the Colts, as well as the Indiana Pacers.
“One area [in the bill] where we struggle and cannot support, is on the issue of official data,” Bell said. “You’re being asked as a body to be the first jurisdiction to create a monopoly-data situation for a league [the NFL]. Leagues have said that they have to do this because the market is exploding. Globally, it is estimated that sports betting is about a $104.3 billion enterprise. Sixty to 70% of that is mobile. At that level of wagering today, if there were integrity problems that had ensued, we would read about them all over the place.”
Bell continued: “As operators, we have a profound interest in making sure that any data that we use is accurate and reliable. We don’t simply sit people in garages and call them to ask them what the score was.”
“Remember, you have a world-renowned Indiana Gaming Commission to regulate this activity,” Bell added. “In Nevada, the [sports betting] statute is thin and they left a lot of the work of defining and regulating this to the regulator. I encourage you to consider that model.”
In an exchange with a lawmaker, Bell argued for private data contracts, rather than a mandate for a sole provider.
A Boyd Gaming representative also testified against the data mandate.
State of Indiana gaming market
The debate around reforming Indiana’s industry comes at a time of market stagnation. The regional market that extends to Cincinnati was described Wednesday as “the most saturated gaming market” in the nation.
Indiana had one of the worst-performing commercial casino markets in 2018. Gaming win of $2.1 billion was up less than half a percentage point compared to 2017, which came while gaming win nationally grew about 3%.
A 2017 sports betting study from Oxford Economics projected that an Indiana sports betting market with mobile wagering could see more than $5 billion in annual wagers and generate more than $370 million in taxable gaming revenue. Sports betting has the potential to dramatically grow the casino gambling market.
State Sen. Mark Messmer, a co-sponsor of SB 552, closed out the hearing by thanking his colleagues for their time. Messmer said there was “good discussion on amendments,” implying that work on the measure will continue despite negative feedback. However, with a session that expires in about five weeks, it would be reasonable to be skeptical that the 130-page bill can be reworked in time to ease stakeholder concerns.
“Watching our state’s gaming market decline for a period of years and remain flat recently was my impetus to look at a comprehensive bill that can help revitalize our gaming industry and have a positive impact on our budgets,” Messmer said in defense of his legislation. “The budget impact from SB 552 will be in excess of $100 mm.”
Messmer, a Republican, said he still wants to “move forward” with the bill.
Messmer said that Penn’s talk of a destabilized Indiana gaming market doesn’t square up with its $50 mm contribution to get casino gambling legalized in Ohio. He said that Ohio casinos have “ravaged” the three casinos in southeast Indiana, including PN’s Hollywood Casino.
The Public Policy committee plans to hold a vote on the measure after Messmer makes any changes to it, which could come as early as next week. Time will tell what is the bill’s ultimate fate.