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Pros, Cons Of Legalizing Sports Betting Fast Versus Taking It Slow

'It's 10 times harder to redo a market than it is to get it right the first time.'

Jill R. Dorson by Jill R. Dorson
May 15, 2019
in Regulation
(Shutterstock)

(Shutterstock)

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One year after the Supreme Court struck down the Professional and Amateur Sports Protection Act, sports betting has been legalized, or operations have launched in 12 jurisdictions outside of Nevada. Of those 12, eight passed new legislation to authorize sports betting. The other four were either already grandfathered in to allow sports betting with nothing further deemed necessary (Delaware), already had laws on the books to allow sports betting (Mississippi, Pennsylvania), or operations launched at Indian casinos regardless of whether or not the state legislature made a determination that sports betting was legal (New Mexico).

At least another 22 states have seen lawmakers introduce sports betting bills and in seven, legislation has produced multiple hearings, or a bill reaching full chambers for votes, or appears to be on the cusp of becoming law. But in many states, the paper died in the process. Finally, Oregon, which was grandfathered in under PASPA, is planning to launch a sports betting product through its lottery in the fall.

As bills have been introduced, discussed and dissected across the country, it’s become clear that some jurisdictions — Washington, D.C., being a prime example — have rushed to legalize. Others, like Illinois and Massachusetts have taken a slow, but steady approach, with destination still unknown.

Learning from states that moved fast

Several of the first-movers have found that speed has translated into problems. As examples, Rhode Island slashed its sports betting revenue projections in half, after a delayed launch and the possibility that it used faulty numbers to make the projections in the first place. In West Virginia, the first mobile app to launch, BetLucky, along with physical sportsbooks at the Mardi Gras and Wheeling Island casinos, have been shut down since early March, after a contract dispute with a vendor. It’s unlikely that state will hit its revenue projections this year.

“What you’re seeing now is that some of the states that were early adopters are making some considerations about whether the policies they put in place were really the right ones,” said Casey Clark, vice president of strategic communications for the American Gaming Association.

On the flip side, Pennsylvania took heat for legalizing sports betting in October 2017 ahead of the SCOTUS decision, but not launching its first physical sportsbook until November 2018. The state’s sportsbooks have yet to launch on mobile platforms, but that appears on the horizon later this month.

In both West Virginia and Pennsylvania, a January reinterpretation of the Federal Wire Act has been a factor slowing the mobile rollout.

“We had bricks and mortar [sportsbooks] up in six months following the court decision, so I don’t consider that slow,” Pennsylvania Gaming Control Board spokesman Doug Harbach told Sports Handle. “As for mobile, there is no doubt that the DOJ Wire Act interpretation announcement may have slowed things a bit, but our jurisdiction wants to make sure we do this right above doing it fast.”

‘Ready, aim, fire’

That’s a mantra heard around the country, from both lawmakers and operators.

“It’s about getting it right, not about being first,” said Brendan Bussmann, a partner in Global Market Advisors, which has done sports betting feasibility studies for multiple jurisdictions. “It’s 10 times harder to redo a market than it is to get it right the first time. Too many states are doing, ‘ready, fire, aim.'”

Washington, D.C. is one notable jurisdiction that “rushed” in 2018. During the legalization process, the D.C. Council voiced what it considered to be enormous pressure to become the so-called first mover among its immediate neighbors. It succeeded, and the legislative sessions in both Maryland and Virginia closed in 2019 with no action. But potential problems manifested in D.C. while the process was underway.

“The Council is using the issue of sports betting and the false urgency of being a ‘first mover’ as a Trojan Horse to justify this extraordinary move to sole source the entire lottery contract,” iDEA Growth’s John Pappas said in January, when the Council decided to forgo the bid process and give its mobile sports betting contract to Intralot, its current lottery vendor.

The D.C. Council’s sports-betting spectacle – The Washington Post https://t.co/B6MvnZGFGi

— Colbert I. King (@kingc_i) February 5, 2019

Councilman Jack Evans, the driver of legal sports betting in D.C., offered up funneling funds to early childhood education and crime prevention as a carrot to lawmakers who didn’t want to legalize. Meanwhile, according to a March news report, D.C. Mayor Muriel Bowser is already trying to send that money to the city’s general fund, instead. Evans was also reprimanded in March by fellow Council members for violating the body’s code of conduct, admitting he had peddled influence.

Sports betting with no existing infrastructure

Tennessee, lacking a comprehensive gaming framework, moved legal sports betting through its legislature in record time earlier this year. A bill sitting on Governor Bill Lee’s desk was introduced in November, but no meaningful action was taken until April 9. It passed out of the Senate ready to become law on April 30. Lee says he won’t sign it, but will let it become law. The bill has warts — among them it’s the first state to institute a “data mandate” requiring states to purchase “official league data” in connection with in-play wagers, a requirement that will have an as-yet unknown impact on the products/platforms available to the consumers in Tennessee.

legal michigan sports bettging
Brandt Iden (District 61) of the Michigan House Republicans.

It’s possible that a handful more states will legalize before the end of 2019, among them Illinois, Massachusetts and Michigan. Lawmakers in Illinois and Massachusetts are taking the slow, but steady approach, holding numerous informational hearings and working with stakeholders behind the scenes before bringing sports betting to a vote. Michigan lawmakers were crushed in December when sports betting, which was part of a package of iGaming bills, were vetoed by outgoing Governor Rick Snyder. Representative Brandt Iden, who spent significant time building consensus and negotiating with the state’s tribal interests, is leading the charge again.

Lawmakers in all those states now have the advantage of being able to look at the states that have launched, study the issues that are arising, see what’s working and driving interest and revenue, and attempt to develop the best scenario for their own states.

“You’ve got one chance to get this right, to drive the illegal market out of business, allow competition, and ensure responsible gaming is met. We have a chance to get in on the front end of this,” Clark said.

No one size to fit all

If one thing is clear to Clark over the last year, it is that SCOTUS made the right decision. There is definitely not a universal law that would satisfy all jurisdictions, as is evidenced by some states legalizing state-wide mobile while others shy away; the prohibition of betting on college sports in some states; and the contentious issues of the “integrity fee” and “official league data” mandates. To date, only Tennessee has mandated the use of official league data and no state has agreed to pay the professional leagues a “royalty” or “integrity fee,” but debate on both topics is — and will likely continue to be — unique in each state.

“All of this is a little bit of a proof point about that the state-by-state method works,” Clark said. “One size doesn’t fit all.”

So far, it appears that most of the jurisdictions that are in a hurry to legalize need the money. And the states that are taking their time have recognized that sports betting is not a budget panacea — it won’t solve a billion-dollar pension crisis or make a hundred-million dollar debt disappear.

It’s also not nearly as simple as it looks. The complexity of legal sports betting is most apparent in larger states and states with a strong tribal gaming presence (Connecticut and Oklahoma, for example), where tribes pay stats substantial sums of money for exclusivity. It is much tougher to build consensus among stakeholders with divergent interests and financial relationships, or find any sort of situation that will mollify all interested parties.

Of the early adopters, New Jersey appears to be the only one truly reaping the rewards. The state, which brought the suit that overturned PASPA, was ready to launch within weeks of the decision. But it had spent years, not months, preparing for that moment. It also is the only state that has launched that offers multiple state-wide mobile options, and that has been key to its success.

Governor Phil Murphy placing the first legal sports wager in New Jersey at Monmouth Park.
Governor Phil Murphy placing the first legal sports wager in New Jersey at Monmouth Park on June 14, 2018

While Delaware and Mississippi can’t boast the same sorts of financial success as New Jersey, both were also early adopters that were prepared even before PASPA was overturned, and that translated into successful brick-and-mortar sportsbook launches with few major glitches.

“What I’d suggest is it’s twofold, those are mature gaming markets that have a long history of casino gaming and a sophisticated regulatory regime place, so they knew what they needed to do,” Clark said. “They relied on engaging licensed, regulated operators in market. I think you see some of these states that have embraced gaming for so long, that they were ready for how to effectively regulate gaming. That’s not a layup for states that have not had a whole lot” of experience.

Of course, unpredictable things do happen even when the best plans are put into place — at an elevated rate of speed or very slowly and deliberately. And going slow surely doesn’t translate necessarily into getting it right. Last week in Illinois where two new amendments were introduced, as more stakeholders have clamped down, it seems they’re further from a consensus than ever before.

But as time goes on, it will likely become more clear that legalizing sports betting is a marathon, not a sprint.

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Jill R. Dorson

Jill R. Dorson

Jill has covered everything from steeplechase to the NFL and then some during a more than 30-year career in sports journalism. The highlight of her career was covering Oakland Raiders during the Charles Woodson/Jon Gruden era, including the infamous “Snow Bowl” and the Raiders’ 2003 trip to Super Bowl XXXVII. Her specialty these days is covering sports betting legislation across the country. You can reach Jill at jill@bettercollective.com

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