Politics and the coronavirus will remain in the way of the expansion of sports betting throughout the rest of 2020, but state budget shortfalls and the need for revenues will bring more states in play to legalize it in 2021 and beyond. Those were the conclusions drawn from a kick-off panel discussion Tuesday launching the SBC Digital Summit North America.
The panelists warned, however, that when states take up sports-betting expansion, the rush for revenue will cause a push to overtax the industry and stunt the marketplace.
“States like Massachusetts, North Carolina and Ohio that we thought were shoe-ins are now maybe looking at 2021 for passage,” said Stacie Stern, director of government affairs for FanDuel. She blamed unrelated political fights, the inability to meet and other priorities amid the pandemic for the delays.
“When you have politics in play and try to introduce legislation that still today could be somewhat controversial, even though it’s going to generate revenue that will help out the state, it’s difficult to get people on the same page when you need bipartisan effort,” Stern said. “Massachusetts is looking at adding revenue by legalizing an activity, but maybe it’s not on the minds of a lot of legislators who are looking at other revenue bills, healthcare or crime bills that have now risen to the top of the priority list.”
John Pappas, founder and CEO of Corridor Consulting, said one of the problems is uncertainty about when state legislatures can reconvene, given the spike in COVID-19 cases in states that were planning on special sessions to complete business left over from before the shutdown.
“That’s up in the air now,” Pappas said. “It’s going to be a wait-and-see in a lot of states as to what their path forward to legislating is, much less the political fights that will go on to get something like this done. We have to get them together to meet to have those fights to begin with.”
Stern said that despite some legislatures not meeting, a lot of discussions are going on behind the scenes in some locales that may not have otherwise addressed sports betting. Acceptance of sports betting has become more prevalent since the Supreme Court struck down a federal ban in May 2018.
Stern mentioned states like Alabama and Wyoming, which have a task force or study commission and are seriously looking at sports betting and other forms of gaming. “I don’t know if this would have happened just a few years ago. The attitudes are definitely shifting and sports betting has become a more acceptable form of activity.”
Becca Giden, a senior analyst with EK Gaming LLC, said in the states where it’s more “politically difficult” to get sports betting done, the question is going to the voters. She cited Maryland and Louisiana, both of which will hold referendums in November, and said that is an option for other states and their dealings with the politics.
“Let’s see if the voters are willing to back this, so there’s political cover if the voters approve it. Politicians will be able to use that cover next year, so let’s get this done (with enabling legislation),” Giden said.
As more states consider adopting sports betting, Stern said it was more important than ever to educate lawmakers who are dealing with so many other bills. Many have misconceptions or don’t understand the economics of sports wagering, how much is paid out and sensible taxing and licensing elements.
“As states are looking to fill revenue gaps, they may view sports betting, igaming or new forms of gambling as something they want to tax at a high rate to maximize revenue,” Pappas added. “As we know, that’s a revenue problem, because the higher you tax something, the less money you will receive from it, due to stunting the marketplace. That is something we have to watch closely as new states emerge.”
Stern said there are other misconceptions to overcome among lawmakers as well. Many think identity verification can only be done in person, as opposed to through a mobile device. The other misconception is that prohibiting legal college sports betting protects athletes who are otherwise at risk from offshore books and illegal bookmakers. On the contrary, she said that legalizing college sports betting helps monitor integrity.