Which States Will Be Part Of The Second Wave of Legal Sports Betting?

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Legal Sports Betting Second Wave

Sports betting has dominated conversation at gaming conferences since the Supreme Court kicked open the door for legal sports betting. The summer meeting of National Council of Legislators from Gaming States (NCLGS) was no exception.

The latest NCLGS conference was held in Cleveland and was one of the best-attended in the organization’s long history. The strong attendance wasn’t a surprise considering it was the first post-PASPA NCLGS conference, but event organizer Spectrum Gaming Group deserves some praise for assembling strong panels and expertly handling conference logistics.

The NCLGS difference

NCLGS is precisely what it sounds like: a group of representatives from gaming states that meet semi-annually to discuss gambling issues with regulators, stakeholders, and industry types. Unlike most gaming conferences where the focus is on the industry, at NCLGS, the focus is on state lawmakers.

Over the course of the three-day conference, Legal Sports Report spoke with lawmakers from several key “second-wave” sports betting states, including Kansas, Ohio, Connecticut, and Michigan. To a person, lawmakers were cautiously optimistic about their state’s ability to pass legislation this year or next.

What states will be part of the second wave of sports betting?

As was the case with online casino and poker legislation, sports betting had an expected group of first movers. The first mover group was larger for sports betting, but like online poker and casino, expansion beyond the initial group of states is proving a bit trickier.

The second wave will have to deal with issues that either were not present or were not given an opportunity to surface in New Jersey, Delaware, Pennsylvania, West Virginia, Rhode Island, and Mississippi.

A new issue means lots of education

The first hurdle the second wave needs to overcome is the newness of the issue.

Whereas sports betting has been on the radar of first-wave states for multiple years, in places like Ohio and Michigan, most lawmakers are getting in on the ground floor.

For lawmakers that means a crash course on a very complicated issue.  They not only need to set state policy, they need to understand how it impacts their district.

That means attending conferences, hearings, holding meetings with stakeholders, commissioning reports and studies, and of course, having lobbyists whisper sweet nothings in their ears.

Further complicating matters, 2018 is an election year. When statehouses reconvene in 2019, there will be plenty of new faces that will need to go through this same process.

Upshot: Educating lawmakers is of critical importance. States that start the process early in the legislative session, and hold hearings will be the best positioned to pass sports betting bills.

Stakeholder disagreements

Part of the lobbying will come from potential stakeholders, and you can expect disagreements anywhere where there is more than one of them.

In Connecticut, that has manifested itself as a disagreement over tribal exclusivity and whether the state has authority to offer sports betting at OTB parlors or through its lottery without tribal consent.

The state’s two gaming tribes assert they have exclusive rights to sports betting. Connecticut Attorney General George Jepsen disagreed with that assertion.

“Sports betting is not listed as an authorized game,” Jepsen said in a statement. “By contrast, for example, pari-mutuel betting on horse and dog racing and jai alai games are authorized games. The exclusion of sports betting from the specific list of authorized games is compelling evidence that the Compacts do not presently authorize it.”

As Connecticut Rep. Joseph Verrengia put it, virtually every aspect of tribal gambling is extremely complicated.

The situation is even more complicated in Michigan, where you have both tribal and commercial casinos to contend with. According to Rep. Brandt Iden, progress is being made (on sports betting and online gambling) but some tribal concern still remains.

According to Kansas Reps. Don Hineman and Jan Kessinger,  a somewhat similar issue has reared its head in that state. The issue is whether or not sports betting should be limited to casinos, or opened up to other entities like the state’s racetracks.

Upshot #2: As they jockey for position in the market, expect fierce disagreements anywhere multiple entities are interested in operating sportsbooks.

Integrity fees

Another issue that already gummed up legislation in some states and could continue to do so in others is sports leagues’ call for an integrity fee.

Integrity fees are a hot-button issue in statehouses across the country. Some lawmakers are cynical about the leagues’ motivations, but others believe a grand bargain is the way to go and want the two sides to come together. As such, whether or not to include integrity fees in legislation is still an undecided issue.

Even though eight states have legalized sports betting without integrity fees, the leagues don’t appear to be backing down. And neither are the casinos, tracks, and other operators backing down from their assertion that the leagues are simply asking for money for nothing.

If states continue to dismiss the leagues’ integrity fee demands, the issue could become moot further down the road. On the other hand, the integrity fee issue has the ability to become even more convoluted if a state (perhaps New York) does side with the leagues. The other option is if the leagues manage to get something done federally — seen within the industry as the longest of longshots.

Upshot #3: Unless some type of commercial agreement is reached between sportsbook operators and leagues, the debate over integrity fees will trip up otherwise acceptable legislation.