Lawmakers Foster Misconceptions About Sports Betting, Importance Of Mobile

Posted on August 3, 2020 - Last Updated on September 10, 2020

Operators and gaming advocates continue to face familiar obstacles when lobbying legislators. Among other issues, there is a misunderstanding of the benefit of full mobile utility and the method of protecting college athletes.

FanDuel governmental affairs director Stacie Stern remarked at the recent SBC Digital Summit that legislators often foster counterproductive beliefs on both topics, from the identity assurance that can be utilized to remote registration and play. But the topic of wagering on college sports seems to elicit more passion because there are actual faces that can be pinned to the cause.

No stakeholder wants a student-athlete susceptible to the pressures of the unscrupulous, whether those shadowy figures are seeking favor or information that creates a betting advantage. But legislators, Stern said, often falsely believe that concerns can be eliminated by restricting wagers on college sports in their state completely, as is constitutionally mandated in New Jersey.

This, in turn, leads to another murky area for many.

“There’s this sort of thinking that, ‘Well, we need to protect the athletes, the student athletes, and so therefore we’re going to prohibit college sports [betting],’” Stern said, “when in actuality there’s already wagering going on in college sports, there are already bookies, there are offshore apps that allow for college sports wagering. So those athletes are already at risk right now. 

“And the greatest way to protect the college athletes is through the regulated market. That is how you know … when there are integrity issues, if they’re the regulated market. But it just seems to not resonate right away with legislators. They feel like they need to prohibit college sports from being wagered on in order to protect the athletes. So [it’s] still an uphill battle to convince people that that is not how to protect the athletes.”

Offshore sportsbooks find a niche where information is lacking

Part of the problem, said John Pappas, the founder and CEO of Corridor Consulting, is the ubiquity of illegal websites and confusion among citizens and lawmakers alike in states where sports betting is not yet legal—and in some cases, where it is.

“It’s funny, because when you look at what the offshore apps do to advertise, they claim that they’re legal,” Stern said. “So [you do] a simple Google search in any state, and you look at ‘legal sports betting’ in whatever your state is, and if it’s not already legal, you believe that you’re doing the right thing because you know that PASPA was overturned, right? They’ve read just enough to be dangerous.

“And by the way, they can download these apps through the Apple store. So if it’s illegal, how can I download the app and how can I deposit money through my credit card?”

Pappas agreed, adding that lawmakers often regard competition as being between the gaming companies that could eventually become regulated industries in their state. The impact of the unregulated companies that are already there (and that remain there once a legal market is established) on revenue is not often considered.

“I think the misconception for a lot of lawmakers is that when they think about competition, they’re only thinking about Rush Street versus FanDuel, or Penn National versus DraftKings,” he posited. “But really, it’s all of those companies versus the illegal market that’s been there for a long time and [has] been accepting customers for a long time.

“So as lawmakers and regulators, everything needs to be put in the perspective of ‘Whatever we do, we have to compete. We have to create a marketplace that allows for those licensed entities, whoever they may be, [so] that they can compete against that offshore industry.’”

Momentum for sports betting has many sources during pandemic

Just as COVID-19 shut down most sports in North America, some of the in-person fact-finding and lobbying meetings needed to establish state house momentum for sports betting have been curtailed. But conversations have continued, Stern said. And some states are leaving it to the populace.

“In the states that maybe it’s even more politically difficult to get sports betting done, we are seeing a couple of states basically put it to the voters,” said Becca Giden, senior analyst at Eilers & Krejcik Gaming. “The states that have to change their constitutions to have it allowed, anyways, they’re maybe taking a first step instead of going all the way to enabling legislation. Places like Maryland and Louisiana have basically just done the referendums this year to say, ‘OK, we know people are interested in this. Let’s see if the voters are willing to back this so that maybe there’s a little more political sort of cover next year.’ When [or] if the voters approve it, then there’s like a more clear consensus that that’s what they want.”

Even states that have previously shown little appetite for gambling have commissioned studies, Stern noted, with Alabama and Wyoming among them, surprisingly. The Governor’s Study Group on Gambling Policy in Alabama has until the end of the year to report findings to Gov. Kay Ivey. The Wyoming Senate approved plans for a state gaming commission in February, and a proposal to expand pari-mutuel wagering is coming to local ballots.

“I think one of the things that lawmakers love to do is study things to death,” Pappas said. “So I think one of the things that we as an industry [are] going to have to focus on is to be able to show really good case studies of how regulated sports betting is working in states to say, ‘Hey, here are the case studies, you don’t need to do your own study.’

“Certainly, there are groups out there like Eilers and others who are really well-positioned to help them understand the economic impacts of sports betting. But … I think we have to look at be sure that when states do look at this earnestly, that they’re not just saying, ‘Well, let’s study it first and see how it would work,’ but make sure that we’re out there providing them with as much information [as possible] so they can make a decision decisively to start bringing in that revenue right away for the state.”

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Tennessee’s sports betting journey a cautionary tale

Tennessee stands as an example of what could be … but isn’t. 

Its moment as the child being raised by the proverbial sports betting village passed somewhere between the proposal of a bizarre set of wagering rules and the realization that no operators have applied to work in the state more than a year after the enterprise became legal.

Just four vendors have been approved since official rules were approved in April. The director of the sports betting division, former UNLV educator and gaming expert Jennifer Roberts, left for a private-sector gaming position, and Colorado has emerged as the new favorite child, with actual operators and bets being made.

Tennessee still has potential and intrigue. It can still serve a purpose in what has become a nation of disparate sports betting fiefdoms as, at least, a case study. There are the 6.8 million residents; the NFL, NHL and NBA franchises; two Southeastern conference institutions; and Nash-Vegas, an almost preordained nickname for the tourism and bachelorette party mecca.

The Tennessee Lottery factor

A state with a lottery — which will oversee Tennessee sports betting — but no in-state gaming infrastructure will establish a mobile-only market, the first in the United States. But state law made Tennessee the first state required to purchase official league data, the golden coin sports leagues groped for once “integrity fee” became passe. The outlandish 85% hold requirement was rolled back to 10% after a scornful response from the industry, and some other oddities, such as scoring ties in a parlay as a loss, have been rectified.

But still, Tennessee just sits there, seemingly devoid of momentum.

Roberts told PlayUSA of her Tennessee junket: “It was a good experience that I was able to help with the regulation process in its early phases and getting applications out to the public and hopefully creating a better set of regulations. It’ll be interesting to see how it rolls out.”

The Tennessee Lottery hopes to launch, as do new markets in front of the lucrative football season. 

Pappas said during the SBC Digital Summit that Tennessee’s weird parlays could have had a “crippling effect.” One problem, he said, was that “regulators, they weren’t really open to accepting input from the industry ahead of regulation.”

“I think in late November there was a lot of concern … ‘Whoa what are these?’ And I think a lot of that could have been avoided had there been more input and communication from the outset,” Pappas said. “But every state is going to do this differently. everyone kind of has their own best practices … Tennessee is an interesting state. They don’t have any commercial gambling or any casino gambling. They are a lottery-only state. This is their first foray into this type of gambling.” 

Added Stern on crafting legislation to build the infrastructure of a new sports betting economy: “[Legislators] want to find something that they’re going through to improve on what New Jersey has done or what Indiana has done. So I think that’s one important perspective. I think another thing too, that I know, at FanDuel and DraftKings, when we worked together on legislation, what we’re trying to do is really start talking with the regulator, if they will have those conversations with us from the very beginning, so that can help to shape the legislation, potentially. And if you can get some of the legislators to work with the regulator and vice versa, I think you can avoid some of those pitfalls that we see in some states.”

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Brant James

Brant James is a veteran journalist who has twice been recognized in the Associated Press Sports Editors Awards, most recently in 2020. He's covered motorsports, the National Hockey League and Major League Baseball among a myriad of others beats and written enterprise and sports business for publications including USA TODAY, ESPN.com, SI.com.

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