Dan Wallach takes us through the most recent developments in the US sports betting market and the regulatory challenges states face to pass legislation.
It seems that every time you turn, a new state has opened up sports betting. 37 US states now allow sports betting, whether it is online, on mobile devices or in retail stores. This number continues to grow each year.
While five states launched regulated sports betting in 2022, only three passed laws that year. These were Maine, Kansas, and Massachusetts. A number of states missed the party, or did not make it in some cases.
California, Georgia, and Kentucky were unable to pass legislation before the end the legislative session. Even Massachusetts legislators had to spend the entire night arguing before finally passing the law.
All involved were embarrassed by the former state. Californian voters rejected both Proposition 26 as well as 27 after spending $600m on their campaigns.
In 2023, it doesn’t appear that the legislative session will be any better.
The last few states are still without sports betting, despite a wave of legislation being proposed.
SBC Leaders interviewed Wallach, a gaming and betting attorney to discuss the challenges facing the industry as it expands.
Political mismatch?
Sometimes, complicated political battles are neatly summarized. The current situation in the US is an example of this. Simple: 13 states left is not too much. If sports betting is still not legalized in these states after five years, it will be difficult to change public opinion.
Wallach said: “The state constitutions are the reason that so many of these states do not allow sports betting. There may be some competition between stakeholders to see who can offer the best deal. These weren’t easy states in the first place.
The easy states were completed in the first two years. We’re now moving on to the states which have been problematic in the past.
When you think about the anti-gambling attitudes of some religious groups, and especially in certain communities, the issues in the past are a bit understated.
It can be difficult to get lawmakers in conservative and southern states to support any expansion of gambling. This is not necessarily a blue versus red issue. Many Democrats oppose expansion because of the risk of gambling addiction.
In spite of the opposition, sports teams and other stakeholders in Georgia and Texas are openly supporting sports betting legislation.
Wallach says that this could be the pressure needed to get legislators to allow sports betting in future elections.
He cited Texas and Georgia as examples: “These are two states with a dynamic political climate that makes it difficult to pass any gambling legislation, because the political and religious climate is antithetical for gambling expansion. You only need to do it one time. There are many lessons that can be learned from past failures.
The professional sports teams are now pushing for legalized sports betting in their respective states. The lobbying became more effective with time, so in the second or even third attempt to pass legal sports betting in these states they actually won over stakeholders who benefited from a better understanding the political and judicial climate in those state.
Geographic Competition
As bordering states legalise sports betting, players will flock across the borders to spend money and contribute to rivals’ coffers.
Consider Texas, which is near several states that allow sports betting, including New Mexico, Arizona, and Kansas. Pro-sports betting campaigns claim that gambling enthusiasts will flock to these states to gamble, or even worse, go to black market and offshore operators.
Wallach says that this argument has been successful in Massachusetts where betting was legalised left, right, and centre. Massachusetts residents often spent their money in New Hampshire forcing the legislatures to reconsider their stance on sports betting in order to keep the dollars in the Bay State.
Wallach said: “That argument already works in states like Massachusetts, where residents have crossed state lines to spend their discretionary income elsewhere.
New Hampshire’s legal framework for sports betting has been fueled by Massachusetts residents traveling to New Hampshire to bet. The numbers are even higher in New Jersey because of the close proximity to New York City and its size.
This approach may be the way to win over Texas legislators.
“States such as Texas, which are surrounded by states that offer legal sports betting and other neighbouring states face significant pressure, or at least face an actual migration issue, as to whether the state of Texas maintains the status quo.”
The Constitutional Problem
A second issue with expanding gambling in the US would be that some states still need to amend their constitutions. In some cases, this would require that two-thirds or more of the state legislature vote for a bill before it is sent to the electorate.
This makes the situation even more complicated and, when you consider some of the other topics covered, it can be impossible to overcome these obstacles.
This year, the issue of a constitution amendment caused a lot of controversy among Georgian lawmakers. The issue of a constitutional change was a sticking point for lawmakers in Georgia this year.
Some people thought this was unconstitutional or dishonest.
Senator Bill Cowsert who filed a law that would have required a public vote said: “I believe it’s only right to let the Georgians decide if they want to make such a big cultural change.
“There are several legislators who personally oppose gambling but believe it is only fair that the people of Georgia make the decision.”
The sports betting bill in Georgia died this year. It was unable to pass the deadline of March 6, when bills were supposed to be sent to the Senate.
Wallach disagreed with Cowsert and said that Georgians would have been able to pass sports betting even without a constitution amendment.
He said: “I have been speaking with a consistent voice about this issue for almost four years, and I have not needed to change one iota.” Georgia Constitution doesn’t ban all gambling. It only prohibits pari-mutuel gambling, casino gambling and lotteries. But it also allows Georgia lottery to be operated for the benefit of education in the state.
The state lottery can still be run as a lotto game, even if sports betting is viewed as lottery.
The industry has not had a positive experience with the electorate recently, especially after the California vote last year.
Despite the $600m spent on campaigning, Props 26 and 27 failed resoundingly, failing to garner even 25% of support from voters.
Brandt Iden spoke with SBC around the time the California vote took place, explaining the reasons why the measures would fail and what was needed to achieve a breakthrough.
Iden said, “My prediction is that everyone goes back to the corner and takes some time off.” I am hopeful and optimistic that commercials and tribes may sit down to try and figure out how this can be done legally.
It will require a compromise, as we have seen in Michigan Arizona and Connecticut where commercials and tribes were able to work together. It would be a real disappointment to spend almost half a million dollars on another battle in 2024.
Iden is well-versed in the legalisation of sports betting process, as he played a key role in Michigan when he was the Representative for the Michigan 61st district.
Iden, when asked about his role and how politicians could overcome some of these hurdles described in this article, explained that everyone needed to work together and resolve their differences in a civil manner.
He said: “One thing that made it very successful was the integration of tribes and commercials within the market. To get there, it took a huge compromise.
“In actuality, it took me 5 and a 1/2 years of my 6-year career and it was the first time that it was vetoed. It took me a very long time to accomplish that. It was hard work.”
