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Stand-alone sportsbooks or wagering activities integrated into bar and restaurant facilities could be limited to fewer than 100 of the approximately 480 tribal gambling operations in 28 states.
The major unknown is what, if any, congressional or state legislation is put into place with repeal of the act.
“Theoretically you would expect the larger tribal operations would have the resources to develop sportsbooks and do the marketing and build the kind of liquidity to make them successful and popular,” said James Klas of KlasRobinson, a hospitality consulting company.
Just 16 percent of the tribal casinos – many in urban areas – generate 71.5 percent of the $31.2 billion industry, according to senior economist Alan Meister of Nathan Associates.
But the predominantly rural tribal industry composed of largely marginal casinos could further benefit from nationwide legislation allowing for online wagering.
“A small operation in a strange, little remote place can do a whole lot of money if they find their niche and get good at it,” Klas said.
Thirty-eight percent of the nation’s tribal casinos generate just two percent of the revenues, said Meister, author of the annual Indian Gaming Industry Report.
Meanwhile, tribes operating government casinos under limitations of the Indian Gaming Regulatory Act (IGRA) and tribal-state compacts would be confronted with a legal and regulatory minefield in getting betting operations up and running.
Tribes also are cautious that legal sports betting by commercial casinos, pari-mutuel racetracks, lotteries and cardrooms will cut into casino revenues used to fund government services for indigenous citizens.
“We need to protect the integrity of Indian gaming,” said Chair Stephanie Bryan of the Poarch Band of Creek Indians of Alabama. “That is very, very important.”
Tribal leaders and industry analysts attending last week’s Global Gaming Expo convention and trade show in Las Vegas warned that revenue projections tied to the legalization of sports betting need to be thoroughly scrutinized.
Chairman Mark Macarro of the Pechanga Band of Luiseño Indians in Southern California said Indian country is being “oversold” potential profits based largely on the estimates that some $150 billion is wagered in the US illegally every year.
He likened the situation to the exaggerated industry predictions that online poker would spread to more than a dozen states, generating billions of dollars in revenue and taxes. The projections were off by some 75 percent, he said.
“We need some new studies, we need some analytics, we need something quantifiable,” Macarro said.
Veteran Nevada sportsbook operator Art Manteris said the rosy revenue predictions do not take into account that the risky business generates only a four- to six-percent margin, is labor-intensive and requires a major capital investment.
“I don’t think the message is being conveyed properly of the risks and the lack of extreme profitability in sportsbooks, or the division of revenues and how that’s all going to play out,” said Manteris, vice president of race & sports operations for Station Casinos.
“Nevada sportsbooks are a very low-margin business. Although we have a great product and infrastructure from a regulatory and management standpoint, there’s not a lot of revenue to be divided.
“Some Strip properties I was involved in, people are shocked when I tell them that sportsbook revenue is something like one to one-and-a-half percent of overall casino revenue,” Manteris said.
“We’re not talking about a massive influx of new revenues in the sportsbook business.”
Most view sports betting as a marketing tool to drive a new, young customer to the casino, hopefully increasing the play on other games and fueling food, drink and entertainment expenditures.
“I’ve always look at the sportsbooks in Nevada as an excitement center of the property,” Manteris said. “The excitement crosses over into the gaming area. That excitement in sports invigorates the entire property.”
Eilers & Krejcik Gaming, an industry research firm, estimates the US market for sports betting with the repeal of PASPA could range from $7.1 to $15.8 billion in annual gross revenue, in a “bullish scenario” attracting 44 million customers and $245 billion in wagers.
“In the event that PASPA is struck down, we believe a significant market for regulated sports betting will emerge in relatively short order in the United States,” the company said.
The prediction is based on the pace of regulations, product availability, the quality of the wagering and the transfer of demand from the black market to the regulated business.
Much of that growth will depend on the $31.2 billion tribal government casino business, which comprises slightly more than half the US casino gambling industry.
There has been significant pushback to sports betting from California tribes, which dominate the industry. Sixty-three tribes, including one Class II bingo facility near San Francisco, generated more than $8.4 billion in 2016.
Many tribes in the Golden State and elsewhere are opposed to legislation that would amend state laws, potentially giving cardrooms, pari-mutuel racetracks and the lottery the opportunity to offer sports betting.
Tribal leaders are also leery of the need to negotiate new or amended tribal-state compacts, which may result in additional revenue sharing provisions.
There has been some opposition to sports betting voiced by tribes in California, Minnesota and Washington. The Seminole Tribe of Florida, the larger Oklahoma tribes, the two Connecticut tribes and the Poarch Band of Creek Indians in Alabama have warmed to legal sports betting.
The legal uncertainty over the ability of tribes under IGRA to take wagers off the reservation diminishes the options for rural tribes.
“If you’re going to rely on people coming into the casino wagering in a sportsbook, you’re not going to generate much,” said Norm DesRosiers, a consultant and former member of the National Indian Gaming Commission.
“You have to do something like in the state of Nevada, with account wagering or making bets over the phone or online. But then you get into the legal issue of taking bets from off the reservation.
“It wouldn’t be an issue if you run the book as a commercial enterprise. If you run it under IGRA you’re going to run into a lot of legal and regulatory issues with account wagering.”
A number of tribal government casinos make little in the way of a profit but are kept in operation to sustain jobs and, in some cases, provide a center for community activities.
“These are not meccas for gambling,” quipped Robbie McGhee, vice chair of the Poarch Creek Indians.
There is little profit incentive to provide the investment capital and seek out the skills needed to operate sports gambling.
“Some of the bigger players do manage their own sportsbook,” said John Repa, president of Hospitality and Gaming Solutions.
“But I don’t see in Indian country, with few exceptions, tribes who would actually self-manage a sports betting facility.
“The profit margins aren’t great in sportsbooks. I think it’s going to be a little more challenging for a rural tribe to get a third-party manager to do their sportsbook.
“I think it should be viewed as an additional amenity to help drive people in to a facility. The big question is whether that then translates into other play at the casino.”