Michigan, New York Break Out Ban Hammer On Pick’em | Sports Betting News | LSR Podcast 210
LSR writer Sam McQuillan makes his podcast debut to talk about the latest moves by gaming regulators in two of the largest states. Plus, Pat Evans recaps the first two weeks in Kentucky, and the crew talks about the latest NCAA betting rule changes and a potential delay in North Caroline online sports betting.
Adam Candee (00:07):
Hello and welcome in to episode number 210 of the LSR Podcast. In the host chair for Matt Brown, I am Adam Candee. We have a couple of LSR’s finest minds with us today to talk about some of the latest and greatest that’s been going on at LegalSportsReport.com. Thanks so much for joining us here on the podcast. Of course, we appreciate all the support that you can give us, whether it’s over at LSR, on our Twitter at LSP Report, or supporting us here at the podcast with a rating, with a review, with a subscription. We appreciate all of those things. Those two minds, of course, the return of Pat Evans to the Legal Sports Report Podcast. And making his first-ever appearance, probably long overdue if we’re being honest here, is Sam McQuillan. Sam, welcome. How you doing?
Sam McQuillan (00:58):
Thanks, Adam. I’m excited to be here. Yeah, long overdue. I’m excited to get into it all. Talk about all the fun stuff we do at LSR.
Adam Candee (01:06):
And it is fun. It is fun.
Sam McQuillan (01:10):
Adam Candee (01:11):
It’s fun for other people to consume it. I know it’s not always fun for you guys to be sitting through long meetings and all that kind of stuff. But hey, that’s what we’re here for. That is what we do. Before we get started, important question for Pat Evans, who I know is also a loyal listener to the LSR Podcast, and I know you usually use this as your lawnmowing podcast. Is it still going to be as good for you to be listening to yourself talking when you’re going out to mow the lawn?
Pat Evans (01:39):
No, and I will not listen to this. I can’t listen to my own voice. It’s not a good thing.
Adam Candee (01:43):
Pat Evans (01:44):
Plus, I already know the content. That’s the best part is being surprised about what kind of things you and Matt are going to talk about. When I’m on it, I already know.
Adam Candee (01:54):
Wow, OK. Well, that’s a downer but that’s OK because we still have lots of exciting stuff to talk about, whether Pat chooses to listen to it or not. Pat’s going to update us on the latest from North Carolina, who we’re expecting to launch early next year. Or are we? And the latest of course from Kentucky as well. New numbers out from GeoComply about how strong the launch has been through the first few weeks in Kentucky, especially with the first couple of weeks of online betting. Is the NCAA considering making some changes to its penalties for betting, especially for betting on teams that are not your own teams?
Sam, let’s start in a place where we have been starting often over the last few weeks. This time there’s some major news coming out when it comes to not only Prize Picks and Underdog, but there are other companies in this space as well in the daily fantasy game who are promoting pick’em-style games that have come under a lot of scrutiny from a lot of regulators at the state level across the country. And two states in particular this week have some news and some new things to talk about.
Sam McQuillan (03:02):
Yeah, I don’t think anyone will be surprised who listened to this podcast to hear that there’s more news in this space. It feels like it’s been a waterfall of just cease-and-desist letters, bans coming out, ever since late July when some operators started to talk about what they saw as potentially being versions of illegal sports betting happening on daily fantasy sports apps. But this week, two of the biggest names that are out there, New York and Michigan, effectively passed these bans that ban anything that is deemed to mimic a player prop sports bet from being on a fantasy sports app.
The companies that you just talked about that have popularized the pick’em games, which essentially are betting player props as long as you parlay them against the house. They’re kind of saying we don’t know specifically if these rules apply to us yet. Until we get specifically told that our product is not welcome here, we’re not going to do anything. You would have to think that these rules are very targeted towards those exact games that have been popularized and are really popular in a lot of states where sports betting isn’t legal.
So yeah, Michigan, their ban is expected to go into effect by the end of October, was some breaking news today that we covered at LSR. And then New York’s, there’s no real timeline for it to go into effect, but it’s in the process. So, these companies right now are saying we’re kind of trying to get our ducks in a row, figure it out, work with regulators. On the last podcast, you guys just talked about Florida taking action, too. It was a lot on their plates, a lot of big states, which could mean maybe shockwaves heard around the country. Other states pick it up.
Now, the only operators that are likely going to be affected in Michigan are PrizePicks and Boom Shakalaka. Underdog used to offer its product there, but it pulled out last year after the state created licensing requirements that essentially made it where the sports betting tax rate is also applied to fantasy sports operators. So, not as big a deal in Michigan. In New York, obviously the sports betting tax rate is 51%, which we know well about how many people are up in arms about that. So it would be a very costly proposition for these companies to continue operating in New York, not to mention the fact that licenses are millions and millions of dollars and there’s no licenses available right now. They’ve got a lot on their plate as these bans take effect.
Adam Candee (05:35):
It’s interesting, Sam, you pointed to something there that is a question for a lot of people because they’ve seen the news that the rules were changed in New York, that the rules were changed in Michigan, that cease-and-desist letters were issued in Florida and in Wyoming where we’re still waiting for an ultimate outcome there. But it seems like what you’re hearing back from the companies is that in most of these places, the games are still active right now, right?
Sam McQuillan (06:02):
Yeah. I’m in New York right now, so I just got an ad for PrizePicks this morning to, I think it was their Taco Tuesday promotion again on Friday or something like that. A lot of people have been reaching out, like you said, wondering what happens to my outstanding wagers, things like that, or outstanding contest entries. The companies are still operating until they’re really going to be forcibly removed from the state or specifically told not to. So, if you’re a user or a bettor who uses one of these apps, you don’t have to worry right now. We’re still waiting on news as to when they’re going to leave.
Adam Candee (06:36):
That’s part of what I think we want to get across here in covering these stories is that there are a lot of people who are involved in sports betting, who are involved in daily fantasy, who used to be involved in poker. Right? Who used to go back to the Black Friday days. I think there are some folks who probably have some concern that, wait a minute, if it’s banned and this goes away, where’s my money going to go? That of course was a much different situation with Black Friday with the federal crackdown on poker.
In this situation, it’s not as though these companies are necessarily going away. It’s a matter of where are they going to be allowed to operate and what’s it going to take for them to be able to continue operating. For example, and we’ve talked about this one in the past, Colorado is a place where the regulators worked with these DFS companies on the pick’em games. They came up with a version that is still allowable where they said you have to have at least four of these picks made together, and it can only be based on fantasy points. Which in the end, if you take it back, goes a lot closer to the original DFS model where you’re talking about basing things on fantasy points, even though the version that we’re talking about now is player versus house as opposed to a player pool, player versus player, peer versus peer, whatever the case might be.
So, a lot of news left to come here. I think it’s going to be interesting as we watch it develop over the next few months to see how far are those who are going against this willing to push against this? We’re going to talk in a little bit about the G2E Convention that is starting next week. You don’t have to look very far in the education sessions to find that there is an education session about combating the illegal market. One of the people, Cesar Fernandez, who made the comments at NCLGS from FanDuel, is going to be on one of these panels again, and it was these comments that seemed to presage what was going on here with a lot of what started happening with the crackdown.
We’re not saying that anyone is the reason for that. We’re not saying DraftKings, FanDuel are the reason for it. They might be; they might not be. That’s not ultimately something that we have the information on at this point. But we certainly do know that the timing lines up very well. Maybe they knew that’s when regulators were going to start taking action and that’s when they felt comfortable speaking up, and maybe vice versa. More on that as we come around on all of these states.
Recapping the first two weeks in Kentucky
Down in Kentucky, Pat, the law originally was a law that was a little bit broader and they were trying to, when Adam Koenig first put this through, they talked about poker, they talked about a number of other additions. It ultimately ended up being more focused on sports betting. We know that before NFL season started, we had in-person sports betting. And now over the last couple of weeks, we’ve had the launch of online sports betting. The most recent numbers from GeoComply give us a little more of a picture of what’s going on there.
Pat Evans (09:37):
Yeah, I was kind of surprised honestly by the numbers that came out of Kentucky GeoComply over the first … I don’t know the math hours, but from 6 a.m. Thursday to after Monday Night Football it was over 10 million pings, which of course is logins, bets, creating an account. And that early on in this process, we identified Louisiana as a comparable state, only 100,000 more residents, and it beats that first weekend. I went back just before this to look at Arizona, and it beats Arizona’s first weekend, and that’s a much bigger state population-wise, which I think is kind of interesting. I don’t know how much of that, we’ll have to see what the actual handle is once those numbers come out and everything, but how much of that can you attribute to the big publicity lead up that we had? Governor Andy Beshear was touting this from the rooftops the past couple of months, I think using it potentially as part of a reelection bid.
But yeah, to look at Louisiana, which launched Super Bowl weekend with Joe Burrow, it’s a little bit more understandable and it helps demonstrate why the NFL weekend is often a target for launches and helps customer acquisition from the sportsbook side of things. Then the other thing I think might have helped, but I don’t know because it was same thing in Louisiana, is maybe launching retail a little bit ahead of time to just help build some momentum might add to that, too, because Arizona was all at once. Yeah, it was a big month, or a big first weekend not month, and I think it’ll be fun to watch this develop. Because as we know, Kentucky’s a big basketball state, college basketball state. I think rather than NFL season, the basketball season might be even bigger down there in the Bluegrass State.
Adam Candee (11:35):
I don’t know about you, Sam, but I thought Pat’s voice sounded great there. I would have no trouble listening to that again.
Pat Evans (11:40):
No, I’m not doing it.
Sam McQuillan (11:42):
Yeah. Yeah, while you’re on the lawnmower.
Adam Candee (11:43):
No, I think you sounded … Yeah, exactly. While you’re out on the lawnmower, right? You invested a lot in that lawnmower, you might as well enjoy the time when you’re on it. You mentioned the 10 million pings, and I think it’s important for people to understand that’s not necessarily 10 million bets, right? That’s geolocation. So, it’s every time someone is logging in. It’s every time someone is failing at a login. It’s every time someone is trying to place a bet, right? We’re covering a lot of area here that doesn’t necessarily mean that we’re talking about bets.
But, Pat, I thought you brought up a really good point to talk about the staggered launch with in-person coming before online, because in particular in Kentucky, there are no casinos, right? This is a state where the only gambling that you’ve had, it is actually a form of gambling that people are quite accustomed to when it comes to horse racing. We know it’s the American capital of horse racing, and we saw that most of the gambling, I should say the sports betting, that took place in the first few weeks was through the horse tracks. That’s where the sportsbooks are essentially tethered to for both their in-person and their online presence. So maybe that’s had some effect as well. I know we’ve written about that a little bit at LSR.
Pat Evans (12:55):
Yeah, I think it does. To the horse racing point, there’s a few of the sportsbooks, DraftKings and bet365, that are going with the 18-and-up age rather than the 21-and-up that a lot of the other sportsbooks are going with. Yeah, it’s just built into that culture down there is the horse racing and knowing what to do there, so maybe that those connecting makes sense. And yeah, to the geolocation pings, it’s 10 million and they tracked them from 325,000 accounts, which is quite a few. Again, more than Arizona in their first weekend, which that number kept making me blink really hard when I was reading the Arizona story from a couple of years ago.
But I think there’s a lot of questions we’re going to have that might remain unanswered or maybe not, is that how much is that 18-year-old segment for those couple of sportsbooks that are taking them? How many of them are coming from Cincinnati, big university there, and even University of Tennessee and Vanderbilt down below? A lot of areas to draw from there. Kentucky’s a fun, weird state. I love it a lot. I’ve spent a lot of time there, and I’m going to be very curious how this all shakes out in the long run.
Adam Candee (14:18):
Yeah. Were you responsible for 8 million of those pings or you’ve spent time there at other times is what you’re saying?
Pat Evans (14:22):
At other times. I was not down there this weekend.
Adam Candee (14:24):
Oh. Oh, OK.
Pat Evans (14:24):
Though maybe I should have tried to go down there this weekend.
Adam Candee (14:28):
Maybe. Maybe, I don’t know. It’s probably a lot cheaper than Derby time to be down there. So yeah, you could have done some on-the-ground reporting. We would’ve found a way to make that happen. But yeah, it’s a lot of interesting questions that Pat’s bringing up in terms of the 18 plus. We know the law allows for that, but not every sportsbook is choosing to go to 18 plus. We have an article up on that at Legal Sports Report about what we anticipate the effect of that will be, and we also have an article at Legal Sports Report about what we expect will be the effect of Kentucky on its neighboring states. Those are both stories that Pat has written, or Jim Gazzale wrote a story as well about how horse racing will be impacted in the state of Kentucky. So if, as I would say to Pat privately, if it bleeds bourbon, we’ve got this thing covered right now. So, one way or the other, all the Kentucky news at Legal Sports Report right now.
The latest NCAA betting rule changes
Sam, Pat mentioned of course the very interesting dynamic of the rabid college basketball fan base that we have both for the University of Kentucky and for Louisville, although last year maybe not so much. But Kentucky in particular has a lot of rabid fans that we expect to contribute a lot to the sports betting universe in Kentucky. The NCAA has been kind of rapidly evolving as we’ve seen some of the penalties come down in the state of Iowa, in Alabama. They’ve had some big stories related to betting on college sports over the last few months, and we’re seeing now that the NCAA might be changing in real time.
Sam McQuillan (16:01):
Yeah, what you call evolving, I’d like to call a Tennessee-Alabama level of goalpost moving. Remember that game a few years ago? The goalpost ended up in someone’s dorm room or something. This is the second time in the last three or four months where the NCAA has decided that it needs to change its penalties for students, or student athletes rather, betting on games that they’re involved in. Our colleague, Mike Mazzeo, has a great story on this about these changes. They’re expected to go into effect by the end of October, which would essentially change it from a dollars-based penalty system, it used to be if you bet $200, you lose 10% of the season, to an offense-based penalty system. Which is very interesting considering that previously they’ve tried to maintain this kind of no-tolerance policy for betting. Now, it’s an offense-based system, but these rules which are expected to be adopted by the end of the month, they might change a little bit, but this is the outline that might report it on.
It’s the first offense, there’s no ban. You’re just required to take some education class and learn about the dangers of addiction, dangers of sports betting, integrity. Everything why you shouldn’t be doing this. The second offense is potential game ban. It’s unspecified, and it’s supposed to depend on the money, back to what the current system is that was just changed. The third offense would be potentially up to a full season of eligibility lost. Essentially what I’m taking away here is if you bet once, it seems like a slap on the wrist, honestly. If you bet twice, you might be banned, but it doesn’t really depend on how much money. Because if you bet another time, only then will you lose a full season of eligibility. Obviously, this comes when you have all these investigations and scandals that have been going on over the past year at Iowa, Iowa State, Cincinnati, Alabama’s baseball coach got fired, and these are supposed to be retroactive like the last changes were.
So, this potentially could change the situation for some athletes that are sitting on the sidelines right now or in the middle of a court case trying to defend themselves. So it’s pretty interesting that, like you’re saying, it’s changing in real time. Correct me if I’m wrong, but I believe all those instances of the investigations of violations involved legal sportsbooks as opposed to offshore sportsbooks. So, it’s interesting that those sportsbooks have been working with the NCAA. Obviously the president, Charlie Baker, came out this week and said, “This is an effort to modernize our betting policy.” Obviously, a lot of the policies the governing body had in place existed before the world of legal sports betting, before even the world of LSR with daily fantasy, and were kind of just rolled over.
If you know anything about the NCAA it’s that they’re very resistant to change. We still only have a four-team (college football) playoff. So the fact that they’re now every couple of months changing the betting rules, it’s pretty interesting, but you’re wondering why are they changing them again and again and again and just tweaking and swapping out an offense system for a dollar system? Are they’re going to keep tweaking it more? So it’s something to watch going forward, what they do, if they change it, do they keep it?
Adam Candee (19:18):
A couple of points that come out of that for me, Sam, the first of which is the rapidly evolving nature. These are the sorts of things that happen when you’ve been resistant to making the changes over the course of time. Right? The NCAA has had the opportunity going at the very least back to 2018 when PASPA was repealed to evolve with the times, but they didn’t really take the steps at that time. It’s looking more reactive than proactive when we see all of these coming down on the backs of what’s happened in Iowa at Iowa State, which by the way are more about criminal investigations than they are about NCAA investigations, right? These are all coming out of the Iowa Gaming and Racing Commission, and that’s ultimately going over to criminal charges in the state of Iowa.
You’re right, Sam, it has everything to do with regulated sportsbooks. It has everything to do with the fact that this is the point of the regulated market. The point of the regulated market is that these things have been happening for a long time. The wrong angle to look at this is to say, because these sportsbooks are more available, these things are happening more. It’s not necessarily false, but when you look at where is the correlation and causation, the correlation and causation is the fact that you’re catching more of these things because you have a system that is designed to catch them. And it’s not just designed to be punitive. It’s a system that is ultimately designed to make sure those who are supposed to be betting are allowed to, and those who aren’t, aren’t allowed to.
You talked about the education component in there. What’s interesting to me is when you hear about that first offense and you talk about penalties where it involves education and the dangers and so on. And I know that a lot of conferences and a lot of schools are increasing the amount of education that they do around sports betting. But if that’s the first step, it almost says to me, well, if you’re going to take that step with those who commit a first offense, why ever let it get to a first offense? That education should be happening for everyone. If you have the access to deliver that education, then I’m assuming it is a higher level of education than what you are giving to student athletes at the beginning of every season. Because otherwise, why would that be something that you would bring in as a level of penalty?
I’ll actually give just a slight pushback on the idea of the changing in real time and what that means and say that I’m OK with them looking at policies and saying, maybe we didn’t get it right the first time and maybe we need to do better with this. Because look what just happened in the NFL. Right? You had a policy that took out guys like Jameson Williams for essentially what? Betting in the wrong location. Placing a legal bet on a legal app that had nothing to do with NFL football, and he was banned for six games. Thankfully with the new policy, it goes down to four for him and two for anybody who does it on a first offense in the future.
So, I think there are positives to be taken out of this by the changes happening at the NCAA level. I just feel like at the same time, we still have plenty of room to grow when it comes to getting it right on number of offenses, how much is wagered, so on and so on. The NCAA did acknowledge within this that they know that they have student athletes who are of legal age, who otherwise would be allowed to place a wager. The NFL has acknowledged pretty much the same, and I think anything that speaks to that reality is a good place to start your policy. It’s a good place to start when you talk about integrity, it’s a good place to start when you talk about treating student athletes and then professionals as young adults and adults when these things happen. That’s my soapbox. I’ll step back off it.
Potential delay in North Caroline online sports betting
We’ll talk a little bit about what’s coming in North Carolina because, Pat, this is another state where not only do we have professional sports, but again, we have a very strong collegiate sports culture in the state of North Carolina. The online betting bill was passed and signed earlier this year, and then we saw some things happen with machinations with the budget, where what we had been looking toward as a January 2024 launch, there at least were some questions as to whether that timeline could be maintained.
Pat Evans (23:41):
Yeah. First thing to put out is to remind everyone that there are retail sportsbooks at tribal casinos. Three of them in North Carolina. So, there is sports betting in North Carolina, it’s just not online yet. To your point, Governor Cooper signed it back in, I think it was June. I think we were all scratching our head like why is this taking so long to get anything rolling? A few things happened. They hired an executive director of sports betting, who’s leading that process, but that was about it. Every time I contacted the lottery down there, which is running this, they gave a vague response but they promised that they were going to launch as soon as January 8, which is the first day they can implement it as possible.
Then, yeah, then the North Carolina budget process rolled around last month and they completely changed the framework to how sportsbooks will enter the state. Before, it was untethered. They would get some preference if they were going to have an in-person, sportsbook partnership with a professional sports organization that’s the pro teams or golf course or racetrack. Then, it got thrown into the wood chipper, I guess. Or I guess not, I don’t know how you’d describe it, but to actually officially tether them and nobody will take responsibility for this.
I think that was one of the weirdest things. I could not pin down anybody to say, “Yeah, it was me.” There were a lot of local reporters down there talking to legislators. They all had no idea where it came from. Even the people in charge of the budget, which that seems weird. I talked to industry sources. They pointed all sorts of different directions. I had somebody point at NASCAR eventually, who they didn’t want to talk about it. Had somebody else come back and say, “Well, it wasn’t NASCAR, but it might’ve been the tracks,” which then is still kind of NASCAR. The language does clarify it. So, NASCAR and PGA Tour get license control. So, those two are suspicious when you think about it from that angle. But who ultimately put it in the budget? We still don’t know.
But anyway, there was a meeting at the lottery last week. Rather than the as soon as possible to January 8th language, they changed it to hopefully we can get it going by June 14th, which is the latest possible in the law to launch. And so, I think that shift, just on its own, tells you that they’re expecting some delays, which I guess makes sense but also doesn’t because we saw how quickly Kentucky was able to get up to launch this year. But again, states all take their own time with the regulatory process. We’re still waiting on Maine. It’s been a process.
Adam Candee (26:30):
Maine? I forgot. Vermont? Maine? I haven’t heard any of these things recently.
Pat Evans (26:36):
Yeah, exactly. So, we’ll see how quickly they go. I think maybe they saw something like this was coming, so maybe they didn’t work as hard as possible from the get-go, and now they will really try to go pedal to the metal to get it out. But yeah, it’s going to be interesting to see once that irons out, how quickly they can get it launched.
Adam Candee (27:04):
I know that those of a certain faith would know, when we talk about the immaculate conception, I think this is the immaculate legislation. Nobody knows where it came from. Nobody knows what happened. Nobody knows who put it in, nobody knows how it got there. But somehow a bill that became a law that was settled, signed, good to go, essentially got reopened within the budget process here. For those who do not follow this closely, and I’m sure most of you who listen to this podcast follow these things closely, but if you happen to be sharing this with your friends and family, this is not normal in any way. We have not seen a lot of this. Not only in sports betting legislation; I worked in politics for a long time. This is not a normal course of action for a bill to undergo this set of changes.
I think Pat laid it out very well in terms of who could be interested in this. It certainly wasn’t the sportsbooks. Put it that way. They are not looking for any sort of extra middleman to have to deal with within this process, when they were just going to have a certain fee set by the state, we pay for our license, we go through it and we start. Now, if you have to go through and deal with a track, a golf course, a professional team, well that’s a negotiation and you have no idea what that fee might ultimately look like to be able to operate through one of those licenses. So, from January 2014 and a Super Bowl launch to June of 2014 and I don’t know, there’s no professional baseball in North Carolina, so I don’t … We got nothing.
Pat Evans (28:34):
Adam, I think you went back 10 years. I think we’re in 2013 now.
Adam Candee (28:38):
Oh, man. Here’s the thing. No, Pat, I’m so old that I say things like 2014 and it sounds perfectly normal to me.
Pat Evans (28:46):
I’m right there with you, bud.
Adam Candee (28:48):
This is like the discussion we had separately on the LSR Slack about the old show, Talk Soup, which I was convinced had gone off the air like five or 10 years ago, and I think it had been 25 years since it was there. So, I keep you guys around not only to keep me young, but when I have my senile old man moments like that, I appreciate you picking up the slack. Thank you.
Pat Evans (29:09):
Adam Candee (29:11):
Thank you. Sam, will you be re-listening to the podcast to hear your voice?
Sam McQuillan (29:15):
Yeah, absolutely. I love hearing myself talk. I can never get enough. So, I’m going to do that every opportunity I get. Plus, just to catch up on all the stuff we talked about. Catching up on North Carolina, Kentucky, NCAA, DFS operators. It was quite a mix today.
Adam Candee (29:33):
We did. We went for a little fritto misto, and I think we made a delicious meal out of the whole thing. Everyone, thanks for joining us here on the LSR Podcast for episode number 210. Hey, we’re going to be at the G2E Convention in Las Vegas. I’ll be making a brief appearance, but Sam and Pat will be there the whole week. If you see them on the floor, stop by and say hi. They’d love to chat and talk a little LSR with you. For Pat and for Sam’s first appearance, I’m Adam. We’ll see you next week.