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On Wednesday, Illinois legislators gathered in Springfield for a second hearing on sports betting.
The first hearing back in August got the ball rolling, but this hearing began to deepen understanding. One big takeaway is that these politicians are in no rush to legalize sports betting. This isn’t a race, but it is beginning to look like they might get there in the end.
The ad hoc committee was formed from two House sub-committees. The spur for the hearing is the 2017 S7 bill, which originally looked only at authorizing a new casino. The bill has expanded and now includes space for sports betting, online casino and poker, daily fantasy sports and other forms of gambling.
The state Senate has twice passed previous versions of gambling bills, so the key constituency that has to be convinced is the Illinois House of Representatives.
Legal sports betting isn’t a panacea for all problems
Rep Rob Rita, who is a supporter of S7, chaired the hearing and asked Rep Lou Lang to speak first. Lang began his testimony by setting out the case for legal sports betting.
Lang is a longtime politician who knows that getting political support is not going to be easy, despite the State’s need for extra revenues. The approach he took was measured, politically astute and persuasive.
Illinois has a $130 billion shortfall in its pension fund, and Lang made it clear that gaming taxes wouldn’t be enough to fix that problem.
But he did say that done right, gaming taxes could make a sizable contribution. He didn’t quote numbers and suggested that some of the higher estimates were ridiculous. He said gambling was “not a cash cow, [it’s] not going to be billions of dollars.”
Pennsylvania is not the model for Illinois to follow
“It is more important to do it right rather than quick,” Lang told the committee. He then pointed to Pennsylvania as an example of how not to do it right:
“If you go too quickly, you make a real mess as Pennsylvania did.”
Where he says Pennsylvania made their big mistake was in not understanding “how different sports betting is from other forms of gambling.” As a result, Lang explained that Pennsylvania had set gaming taxes far too high and they would not achieve their legislative objectives.
Taxes on sports betting are 36 percent in Pennsylvania compared to 6.75 percent in Nevada.
Lang went into detail as he explained exactly why politicians should not set high tax rates for sports betting and other gambling.
“If this industry is taxed too high, illegal betting continues.”
He explained that high taxes raise prices and said that this created a deterrent to transitioning players to legal sites:
“Why would somebody who’s just a casual bettor make a legal bet as opposed to an illegal bet?”
The one thing that Pennsylvania did do right was to legalize online casino, online poker and sports betting. Lang said that Illinois should not restrict their debate to sports betting, but bring these other popular forms of gambling into state regulation.
Addressing other issues, Lang spoke about the “integrity fee” or “royalty” that the sports leagues have demanded. He was not opposed, but instead said that the fee should actually be in exchange for something:
“I don’t have a problem giving major league sports a fee, but I want to give them a fee for something. Not a fee for nothing.”
Industry speakers explain that effective, safe gaming is possible
Lang was followed by several industry speakers who explained some of the technical issues that the legislators have to decide to implement regulated gambling.
Lindsay Slader from GeoComply explained how the company uses 350 separate checks every time they establish that a mobile user is legally present when they gamble.
Michael Pollock from Spectrum Gaming Group set out four principles that the politicians should follow. To summarize:
- No bad actors—restrict gaming to responsible operators
- Focus on land-based casinos—consider giving the brick and mortar casinos a virtual monopoly as is the case in New Jersey
- Trust regulators—Give the regulators enough power to do their job in an environment which is highly innovative
- Ignore the calendar—Pollock supported Lang in saying that getting it right is more important than making a fast decision.
Regulators are empowered by online gambling
Kevin Mullally is a former regulator who has worked with the Illinois regulators on setting up a self-exclusion database. Now with Gaming Laboratories International (GLI), Mullaly raised a few eyebrows when he explained how much more information regulators have from online gaming.
He compared an online player with someone who walks in to play a slot machine at an existing licensed location. Regulators don’t know who the person is, how old they are or where their money comes from. All of this information and much more is available for regulators when the customer plays online.
Up next was Jim Ryan, CEO of Pala Interactive, which operates Pala, a state regulated online casino and poker business in New Jersey. Ryan explained how he had set up an account at an offshore operator from his hotel room the night before.
“I have no idea if the game I played last night is fair. I have no idea if the $75 I deposited continues to exist. And I don’t know, if in fact the Bears beat the Patriots, if I’ll be paid.”
His evidence appeared to have a significant effect on the politicians and powerfully made the case for legislation.
Sports leagues want cash and controls over game integrity
The hearing also listened to testimony from representatives of the four major sports leagues.
For years, the sports leagues opposed legal sports betting. But since the Supreme Court overturned PASPA, they have reconciled themselves to the increased financial opportunities now available.
The American Gaming Association (AGA) has released a study by Neilsen that shows the NBA and MBA could see an extra $1.7 billion in revenues as the result of legal sports betting. Sara Slane, AGA senior vice president of public affairs, said:
“The four major sports leagues will earn a collective $4.2 billion from widely available legal sports betting, further proving that working together with the gaming industry will pay dividends for all sports stakeholders.”
The leagues made the case that any regulation the Illinois legislature produces should not be too restrictive or hamper the way they “work together” with the gaming industry. On the other hand, the leagues do want additional regulation with regard to players and game integrity
NFLPA representative Joe Briggs threw out the idea that player safety might become an issue. He suggested that bettors with a financial interest in a particular game might actually attack players. He referenced the recent beer throwing incident in Massachusetts as evidence.
Clarence Nesbitt from the NBPA said that players own their own performance and biometric data. He asked that the committee ensure that any law should include provisions that respect that right. He also said that players should have the right to privacy.
Nesbitt referred to LeBron James, who had an injury during last year’s NBA finals. Such injuries are obviously of great interest to sports bettors, but players should not be forced to disclose private medical information.
What happens next?
There is no chance that Illinois will pass a sports betting bill this year. If the gambling bill supporters can convince the House, 2019 looks like a better probability.
The tone of questions from the combined committee together with the members’ reactions to the witness testimony certainly sounded more positive than in the past. In the end, Illinois’ fiscal problems will probably override any reservations from the anti-gambling opposition.