Tag Archives: sports betting

Steve Geller named General Counsel of the National Counsel of Legislators from Gaming States (NCLGS); Speaks at NCLGS Winter Conference on casino saturation and what states can realistically expect in terms of Tourism from new casinos.

I attended the NCLGS Winter Conference in New Orleans, which was held from January 4-6.  NCLGS is the only organization of State lawmakers that meets on a regular basis to discuss issues in regard to gaming.  Members of NCLGS chair or are members of Legislative committees that are responsible for the regulation of gaming in their states.  NCLGS does not promote or oppose gaming, but is primarily concerned with proper regulation of the gambling industry.

I was the founder of NCLGS in 1995 and was its long-time first President.  I have remained very active in NCLGS, and was named its General Counsel at the Winter meeting.

On Sunday, January 6, I spoke on a NCLGS panel discussion.  The topic for the panel was When developing gaming public policy, legislators often envision casino out-of-state patrons who will do more than gamble in the casino. But with more than 1,000 casinos in 42 states, and with new casinos generally being built to smaller scale due to their proliferation, is it realistic to expect them to be tourism magnets? Are there many markets remaining where destination resorts could be developed to attract tourists? In this panel, operators will provide insight into what states can realistically expect, and what they must do to meet the goal of tourism promotion.”

In my remarks, I discussed the history of recent gaming expansion nationally.  This included Indian casinos, “riverboats gambling” (which is generally not conducted on what most people would consider to be “riverboats”, racinos, and commercial casinos.  The most common thread on the expansion of all of these except for Indian gambling is the desire for one state not to see its gambling dollars go to another state.  Once one state starts a type of gambling, there is increased pressure on neighboring states to have similar types of gambling.

It seems clear that the proliferation of casinos is generally reaching saturation in most areas.  For example, in the Northeastern United States, there appears to be a situation where new casinos are cannibalizing revenue from existing casinos.  Total gaming revenue may go up, but revenue per casino appears to be going down.  I gave quotes from both Moody’s and the American Gaming Association (AGA) discussing that while this appears to be most acute in the Northeast, it is a national issue.

It appears that building casinos by itself is no longer sufficient to attract new tourism.  It is unclear if casinos by themselves have been enough to attract tourists in recent years, or if casinos were only helpful as part of a general resort that attracted people.  Today, however, there is so much availability of casino gambling without the necessity of travelling that just providing additional opportunities for gambling will not  attract tourism.

Many casinos today are being built on a smaller scale, and are designed to attract primarily local patrons as opposed to tourists.  It seems that the new casinos that are attracting tourists are the “hubs” of the “hub and spoke” model.  This seems to work better with large casino chains with robust loyalty programs where casino patrons can gamble locally, and then cash in player rewards at larger resorts, where casino gambling is only part of the attraction.

Food and beverage, shows, and other diversions are a must to attract tourism dollars. Las Vegas and Atlantic City have recognized this. For example, in Las Vegas in the 1990’s, over ½ of the casino revenue came from gambling, while today it’s down to about 1/3.  As younger people lose interest in slot machines, which have traditionally been and remain the biggest gambling money-makers for casinos, casinos will need to do other things to attract people and remain relevant.  Some things being discussed are sports gambling, skill-based gaming, E-sports, and even virtual reality gaming.

The most important thing to remember is that the tax rate set by a state will determine what type of gambling takes place in that state.  Legislators will need to decide what is most important to them in their states.   Hub resort casinos require a lower tax rate to be successful than does a “slots barn”.  A state can make money on casino gambling with most tax rates, but lower tax rates result in more investment and jobs, while a higher tax rate can result in more total gambling-exclusive revenue.  A tax rate of 6% may get a state a Wynn or Bellagio-style luxury resorts, a tax rate of 25% may get a state a nice hotel franchise casino, a tax rate of 60% may get a state slot machines at convenience stores.  All may be viable models; all result in completely different outcomes based on the tax rate.

Geller speaks at NCLGS on the potential effect of Sports Betting on Pari-mutuels (summary below) and Webinar for GiGse on Sports betting

Since my last Post, I’ve spoken to the National Council of Legislators from Gaming States (NCLGS) on July 13 in Cleveland, Ohio, on “the potential impact of Sports Betting on Pari-mutuels”. On July 26 I was a panelist on a GiGse webinar entitled “U.S. Sports Betting & Wire Act – addressing key issues and questions for a successful regulation and operation of sports betting roll-out across states.”. It seems that sports betting is the flavor of the day in Gambling seminars. This post will deal with my NCLGS comments. I intend to post soon on my GiGse webinar comments.

At NCLGS, I pointed out that the absolute fiscal impact of sports betting at the Pari-Mutuels is likely to be negligible, but that the opportunity is great. Let me elaborate.

Nobody knows what is the total amount of wagering that currently occurs on sports betting. The most common numbers I’ve seen are between $100 and $300 billion, so let’s assume it’s $200 billion. Much of that is “sticky” meaning it will stay where it is, with illegal bookies and in office pools, etc. This is even more likely to occur if there are high taxes on sports betting. On the other hand, there may be large untapped demand, which would expand if sports betting is legalized. Anyone that pretends to know what the actual number is probably is just making it up…, excuse me, I meant to say is simply doing exact calculations on an inexact number, to come up with an educated projection. In other words, making it up. However, most of that expansion would occur in Internet sports betting, which, as I will explain in my comments on the GiGse webinar, is probably illegal. Since I can make up numbers as well as anyone else, my scientific calculation is that there will be approximately $150 billion in Sports betting. Just guessing.

The takeout (Gross Gaming Revenue, or GGR) on sports betting is generally around 4-7% in Las Vegas casinos. Let’s assume 5%. 5% of $150 billion is $7.5 billion. If states increase the takeout much more than that, too much of the gambling will stay illegal. If states raise tax rates above a certain unknown number (10-20%??), they will make it unprofitable for operators. Let’s just assume that the state tax rate is 12%, the Federal excise tax rate is .25% of the wagering (not the GGR), the sports leagues and individual teams ask for their percentage (either of GGR or wagering), and we see that there’s not a lot left for the operators to make money on. In Nevada, the expenses for running sports gambling before taxes and the other issues I’ve discussed approach 50%. Further assume that Nevada will continue to attract most big rollers for sports wagering, and we can see that there isn’t much left to spread around as profit for individual operators in the rest of the Country.

However, there is some good news for pari-mutuel operators, if they take advantage of it. I believe that at least initially, most states will restrict sports betting to their existing licensed gambling facilities. I think that this will occur because the existing facilities have substantial political clout in their states, because Internet sports wagering may be illegal (because of the Wire Act, which wasn’t thrown out when PASPA was), and because of a desire to at least start in a more conservative fashion. In Las Vegas, we’ve seen that sports betting isn’t that big of a revenue generator for the casinos. The casinos use sports betting to attract customers to their casinos, and they do this well. If pari-mutuels around the country take advantage of this, upgrade their facilities, diversify their gambling base, and use sports betting to attract new customers, then sports betting may indeed be a huge boost to pari-mutuels. I won’t hold my breath.

Geller to speak at Summer Meeting of National Council of Legislators from Gaming States (NCLGS)

I was the Founder and National President of the National Council of Legislators from Gaming States (NCLGS), and I remain as Senior Adviser and Special Counsel to NCLGS today. I will be speaking on Pari-Mutuels and Sports Betting at their upcoming summer conference in Cleveland. Enclosed below is a Press release with the details of this meeting.

Legislators from Gaming States Announces Roster of Expert Speakers for July 13-15 Summer Meeting in Cleveland
(PRNewsfoto/National Council of Legislators)
NEWS PROVIDED BY

National Council of Legislators from Gaming States
Apr 24, 2018, 11:15 ET

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CLEVELAND, April 24, 2018 /PRNewswire/ — The National Council of Legislators from Gaming States (NCLGS) today announced the roster of speakers for its Summer Meeting that takes place July 13-15 in Cleveland. Registration is open to the public.

“Our slate of speakers includes many of the most respected and thought-provoking experts from different fields, including regulators, gaming operators, attorneys, financial analysts, problem-gambling specialists, and other gaming-related professionals,” said incoming NCLGS President William Coley, a senator from Ohio. “Everyone with a stake in the future of legalized gambling – in any form – should join dozens of state legislators and attend our Cleveland meeting.”

In addition to legislators who will chair Committee sessions, the following experts will speak in Committee and general sessions:

Andy Abboud, VP, Government Relations & Community Development, Las Vegas Sands
Joe Asher, CEO, William Hill US
Karl Bennison, Chief, Enforcement Division, Nevada Gaming Control Board
Dennis Berg, Director, Ohio Lottery
Byron Boothe, Vice President, Government Relations, Intralot
Michael Burke, Executive Director, Michigan Association on Problem Gambling
Anthony Cabot, Distinguished Fellow, University of Nevada-Las Vegas, William S. Boyd School of Law
Richard Carter, CEO, SBTech
Heather Chapman, Supervisory Psychologist/Director Gambling Program, Louis Stokes Cleveland VA Medical Center
Andy Cunningham, Director Global Strategy Integrity Services, Sportradar
Brian Egger, Senior Gaming & Lodging Analyst, Bloomberg Intelligence
Steve Geller, Esquire, Geller Law Firm
Ken George Jr., Chair, Forest County Potawatomi Gaming Commission
Will Green, Senior Director, Research, American Gaming Association
Becky Harris, Chair, Nevada Gaming Control Board
Mark Hemmerle, VP, Legal and Compliance, Worldpay Gaming
Jeremy Kleiman, Member, Saiber LLC
Derek Longmeier, The Problem Gambling Network of Ohio, Executive Director
Tim Lowry, Partner, DLA Piper
John Maddox, Vice President Government Relations & Development, Caesars Entertainment
Art Manteris, Vice President, Race & Sports Operations, Station Casinos
Stephen Martino, Senior Vice President & Chief Compliance Officer, MGM Resorts International
Christopher McErlean, Vice President – Racing, Penn National Gaming
Dan Metelsky, Public Gaming Strategist and Public Policy Leader, Public Gaming Creative Strategies
Kevin Mullally, Vice President of Government Relations & General Counsel, GLI
Dave Payton, Vice President of Sales, AmTote International
Michael Pollock, Managing Director, Spectrum Gaming Group
F. Douglas Reed, Senior Pari-Mutuel Associate, Spectrum Gaming Group
Tim Richards Chief Product Strategy Officer, Everi
Lindsay Slader, Operations Manager, Geocomply
Ernie Stevens Jr., Chair, National Indian Gaming Association
Lovell Walker, Executive Director of Interactive Gaming Development, MGM Resorts International
Daniel Wallach, Shareholder, Becker & Poliakoff
Joseph Weinert, Executive Vice President, Spectrum Gaming Group
The NCLGS Summer Meeting agenda includes:

Six legislative committee sessions: Casinos, Emerging Forms of Gaming, Lotteries, Pari-Mutuels, Responsible Gaming, and State-Federal Relations
Two Masterclass panels conducted by the International Masters of Gaming Law focusing on sports betting and online gaming
Special general session panel examining the economic impacts of gaming
Friday evening welcome reception
Saturday afternoon tour of Intralot’s facility serving the Ohio Lottery
Optional Saturday night baseball game (via separate registration fee at special group rate): New York Yankees at Cleveland Indians
To view the agenda, register, and book hotel rooms at the host Marriott at special attendee rates, visit http://www.nclgs.org/meetings.html.

For sponsorship information, contact Dawn Wagner at dawn@nclgs.org. Legislators and others seeking NCLGS membership information should contact Wayne Marlin at wayne.marlin@nclgs.org.

NCLGS is the only organization of state lawmakers that meets on a regular basis to discuss issues relating to gaming. Members of NCLGS serve as chairpersons or members of state legislative committees responsible for the regulation of gaming in their state legislative houses. NCLGS does not promote or oppose gaming but is primarily concerned with the regulation and economic and social impacts of the industry. The NCLGS Foundation is the educational and research arm of NCLGS. The 501(c)(3) non-profit is a source of non-partisan data on issues of gaming legislation and regulation.

Spectrum Gaming Group, which has performed advisory and consulting work for gaming operators, regulators and legislatures in 36 US states and territories and in 47 countries on six continents, serves as the Executive Director of NCLGS.

SOURCE National Council of Legislators from Gaming States

Related Links
http://www.nclgs.org

After review of legal literature, I slightly revise my opinion of Sports Betting over the Internet

On May 31, 2018, I spoke at the GigSe conference in Miami on the topic of Sports Betting after the recent Supreme Court ruling invalidating PASPA.  My comments reflected the same position that I made in my last blog post, that the Wire Act still appeared to prohibit Sports betting, even from states where such gambling is legal to states where such gambling is legal.  During the Question and Answer period, one person asked me if I was familiar with Former U.S. Solicitor General Ted Olson’s remarks that because PASPA was gone, that meant that Sports Betting among states could be legalized, and therefore the Wire Act would no longer apply.  I advised that I had not heard that Olson had made these remarks, but that I’d check.

I cannot find anywhere that Olson has flatly come out and said that the Wire Act doesn’t apply any longer.  I have located articles where he has questioned whether the Wire Act still applies.  I have reviewed the literature on this, and I have reached several conclusions.  These conclusions are my current opinion, are based upon my own knowledge and the opinions that I have read from or discussed with other experts in the field.  They are still preliminary, and are subject to change, as I have not researched this area as thoroughly as I would if I was representing a client in this area.  With all of those caveats, here is my opinion.

The majority of the opinions from people that I respect seem to range between saying that the Wire Act still applies to saying that the Wire Act may still apply, but that they have some questions.  The majority seem to believe that the “safe harbor” section of the Wire Act would permit sharing of information from a state where sports betting is legal to a state where sports betting is legal, although it would not permit the actual betting over the internet, even if sports betting is legal in that state.

I have largely ignored the many articles written by non-lawyers, who appear to believe that if they want it to be legal, it must be legal, or whose major source of information is what they read in a general purpose newspaper.  In reading articles, papers, and presentations written by attorneys, the predominant position seems to be “that’s a good question.”, or “The Wire Act currently seems to prohibit it, but it would require litigation or a ruling from the USDOJ to conclusively respond”, or some variation thereof.

Having now reviewed the literature, I slightly amend my prior position,  from saying “it currently appears to me that the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, continue to prohibit internet wagering on sports betting” to saying that that “the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, appear to continue to prohibit internet wagering on sports betting  but it would require litigation or a ruling from the USDOJ to conclusively respond”.

 

U.S. Supreme Court ruling on Sports Betting may have less impact in Florida than many believe

The United States Supreme Court has issued its ruling in Christie v. NCAA, Case 16-476, stating that the Professional and Amateur Sports Protection Act (PASPA) is unconstitutional.  Many people mistakenly think that this has legalized Sports Betting.  I expect the ruling to be far less consequential than many think, especially in Florida.

No one knows how much is wagered on illegal Sports Betting in the US today because it’s, well, …illegal.  I’ve seen estimates ranging from $107 billion to $300 billion.  I think that today’s accurate number is probably somewhere between $150 billion and $200 billion, based on averaging the numbers I’ve seen, even though they’re only guesstimates. Some people assume that all of those wagers and more will immediately go into legal Sports Betting.  I disagree.

People enjoy the traditional Office Pool on things like the NCAA Basketball tournament, and other events.  Most of those people won’t stop the pools to go wager at a casino.  Some people wager on credit with illegal bookies who have “creative” ways of collecting debts.  Those people will still go to bookies because of the credit issue. States will tax sports betting (some will do so with heavy taxes), private operators will want to make a profit, and the Sports Leagues have already demanded a cut. I think that the Sports Leagues and states are expecting a larger cut than will prove to be feasible.  With all of those takeouts, a bookie should be able to offer better odds.

The biggest issue about the size of the market is whether or not Sports Betting will be able to be offered online.  Most boosters say yes, but I don’t know why.  I believe that Sports Betting will, at least initially, be limited to bricks and mortar casinos.

Many people think that the famous December 23, 2011 “Christmas Surprise” ruling from the United Stated Department of Justice, Office of Legal Counsel, authorized internet gambling, including Sports Betting.  Incorrect.  The OLC ruling was much more limited.  It was based on an acknowledged conflict between the prior interpretation of the Wire Act of 1961, and the 2006 Unlawful Internet Gambling Enforcement Act (UIGEA). The interpretation of the Wire Act had been that any type of Internet Gambling was illegal, but UIGEA specifically excluded Intrastate online gambling from penalties.  OLC issued the Christmas Surprise ruling announcing that their longtime previous interpretation of the Wire Act was incorrect, and that the Wire Act should only apply to Sports Betting, and that only Sports Betting is illegal over the internet.  Department of Justice Ruling December 2011 on Internet Gambling.  Let me include quotes from that opinion:

“We conclude that interstate transmissions of wire communications that do not relate to a “sporting event or contest,” 18 U.S.C. § 1084(a), fall outside of the reach of the Wire Act. Because the proposed New York and Illinois lottery proposals do not involve wagering on sporting events or contests, the Wire Act does not, in our view, prohibit them.”

“The Criminal Division’s conclusion that the New York and Illinois lottery proposals may be unlawful rests on the premise that the Wire Act prohibits interstate wire transmissions of gambling-related communications that do not involve “any sporting event or contest.” See Crim. Mem. at 3; Crim. Supp. Mem. at 2. As noted above, both Illinois and New York dispute this premise, contending that the Wire Act prohibits only transmissions concerning sports-related wagering… We conclude that the Criminal Division’s premise is incorrect and that the Wire Act prohibits only the transmission of communications related to bets or wagers on sporting events or contests.”

This provision contains two broad clauses. The first bars anyone engaged in the business of betting or wagering from knowingly using a wire communication facility “for the transmission in interstate or foreign commerce of bets or wagers or information assisting in the placing of bets or wagers on any sporting event or contest.” Id. The second bars any such person from knowingly using a wire communication facility to transmit communications that entitle the recipient to “receive money or credit” either “as a result of bets or wagers” or “for information assisting in the placing of bets or wagers.” Id.5”

“Reading the entire subsection, including its second clause, as limited to sports-related betting also makes functional sense of the statute. Cf. Corley v. United States, 129 S. Ct. 1558, 1567 n.5 (2009) (construing the statute as a whole to avoid “the absurd results of a literal reading”). On this reading, all of subsection 1084(a)’s prohibitions serve the same end, forbidding wagering, information, and winnings transmissions of the same scope: No person may send a wire communication that places a bet on a sporting event or entitles the sender to receive money or credit as a result of a sports-related bet, and no person may send a wire communication that shares information assisting in the placing of a sports-related bet or entitles the sender to money or credit for sharing information that assisted in the placing of a sports-related bet.”

Based on the DOJ opinion, a consensus has emerged among serious attorneys that the Wire Act prohibits interstate internet gambling, but permits intra-state internet gambling if authorized by the legislature of that state. It is not clear if interstate compacts are permitted.  Information on shared pari-mutuel pools through the internet, although apparently otherwise prohibited by the Wire Act, are expressly permitted through the later Interstate Horse Racing Act.

It currently appears to me that the clear wording of the Wire Act and the December 2011 DOJ memo both, at a minimum, continue to prohibit internet wagering on sports betting.  It is not clear to me at this time if even sports betting at local brick and mortar casinos in states that authorize sports betting would be permitted if that wagering is part of interstate pools.  Remember that the Wire Act prohibits not only wagering on sport events, but also prohibits “ information assisting in the placing of bets or wagers.”

Finally, the prospects are even worse in Florida.  Florida is unlikely to have an opportunity to have a Special Session of the Legislature prior to the elections.  There will be a referendum on the November ballot pertaining to voter control of gambling that may or may not impact sports betting.  It is also certainly possible that competition between the different gambling industries in Florida, and opposition from the same forces that are pushing the anti-gambling referendum (such as Disney) may result in an inability of Florida to pass any sports betting legislation.

 

U.S. Supreme Court ends New Jersey’s current hopes for Sports Betting.

The United States Supreme Court has ended the State of New Jersey’s current hope for sports betting, at least for now. The Supreme Court denied certiorari, and refused to hear an appeal from the Third Circuit Court of Appeals, which had upheld a lower court judge who ruled against the State. This ruling was expected by most experienced appellate attorneys. The Supreme Court rules against even hearing most appeals where there are not conflicting opinions from different Circuit Courts of Appeal, and there were not conflicting rulings here. By refusing to hear the appeal, the Supreme Court offered no opinion on the underlying merits of the lower court rulings (nor do I).
In 1992, the United States Congress passed the Professional and Amateur Sports Protection Act (PASPA) which prohibited sports wagering, but grandfathered in four states that had some form of sports wagering. Nevada had full sports wagering, while Delaware, Montana, and Oregon had certain limited sports wagering. New Jersey was given one year to opt in to sports wagering, but failed to do so at the time. In 2011, the voters of New Jersey approved a referendum placed on the ballot by the Legislature calling for approval of sports wagering. In 2012, Governor Chris Christie signed legislation permitting sports wagering in New Jersey. The NFL, NBA, MLB, NHL, and NCAA filed suit against New Jersey, alleging that the 2012 law violated PASPA. The Trial Court Judge ruled against New Jersey, and by a 2-1 vote the Third Circuit Court of Appeals upheld the Trial Judge.
State Legislators from New Jersey have pledged to continue the fight for sports betting by other methods, which may include asking the Federal Government not to enforce PASPA, asking Congress to amend PASPA, or trying to further change New Jersey laws in a way that could bring sports wagering to New Jersey in a way that would be consistent with PASPA.