Opinion: Finding Good For US Sports Betting Industry As World Pauses On PASPA Anniversary

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US sports betting

No one stops to reflect during a gold rush.

It’s not a gold stroll or a gold spa day with exfoliating facial. You rush in a gold rush.

(Thank you for coming to my TED Talk.)

Yesterday marked two years to the date the US sports betting gold rush started. The Supreme Court enabled a sprint whose pace makes those toilet-paper hoarders look calm: nearly $22 billion in legal sports bets taken in less than 24 months.

What a strange time it is, then, for the PASPA anniversary to arrive. Frozen in place at what should be its hottest point, the industry receives unwelcome time to reflect when it wants action.

Those who embrace the sudden stoppage as an otherwise unattainable chance to evaluate the path forward might just find better years beyond the eventual restart.

US sports betting growth on hold

The coronavirus pandemic pauses existence as we knew it, stemming the sports betting gold rush and other luxuries as we focus on health and safety.

Funders and traders alike still share bullish long-term optimism for the nascent US industry. DraftKings certainly does not enjoy a $6 billion initial market cap on fanciful dreams of more table tennis and darts betting.

Promises of future salad days, though, do little to soothe leveraged international operators and cash-light hopefuls. Attrition and contraction because of COVID-19 likely will cause lasting pain for many.

Finding light in dark times

Imagine what depths the industry’s pain might have reached if the pandemic arrived sooner.

More than a third of US states offer legal sports betting just two years after being given the opportunity. The $22 billion in wagers translates into more than $1.5 billion in revenue and more than $205 million in taxes for states.

Simply put: at least the skeleton of a US sports betting industry will exist when sports return.

What flesh goes onto those bones remains a dynamic question. Reflection in these darker moments could clarify the best answers about regulation and innovation in a changed world.

US sports betting after the storm

When will you next feel comfortable trusting the personal choices of 50,000 strangers in a stadium? More acutely, when will you next be allowed into a stadium at all?

How we experience sports in the United States could change drastically when pro leagues return.  How we enjoy sports betting could — and possibly must — change as well.

Think about the March Madness experience at a Las Vegas sportsbook. The first weekend of the tournament represents the pinnacle of what retail sportsbooks want to market: you and your buddies sweating hours of action while parked in front of a wall of giant TVs.

Now think about a socially distanced March Madness weekend.

Your masked friends sit at least 6 feet apart, assuming you actually can find seats. Safely separated lines of customers stretch from the counter to the parking garage to get bets down. Your neighbor’s eyes burn holes through your soul when you hack up a lung from an oversized bite of hot dog.

The retail sportsbook experience in March or on any NFL Sunday will require an overhaul. The time to plan it is now.

The answers and challenges of mobile

Some armchair pundits spent the past two months jumping from the clear challenges of post-pandemic casinos to the conclusion that states will adopt mobile sports betting.

To these people, consider this a standing invitation to watch a few hours of state legislatures with us. See if you still believe that hypothesis after we finish.

Only 10 states offer mobile right now. Others that considered legalizing in 2020 did not include it in their bills.

Despite rapid adoption by and popularity with bettors, mobile sports betting encounters skeptics everywhere. They express unfounded or undereducated concerns:

“How do we know who’s really betting?” (Know Your Customer checks.)

“How do we know if they’re actually in _____ when they bet? (Geolocation.)

“If they bet on their phone, people won’t come to casinos.” (Years of contrary evidence.)

Presenting the product for the long haul

The coronavirus pandemic provides a convenient yet callous cover to push states to legalize mobile wagering. That thinking not only risks alienating those rightfully sensitive to exploiting a tragedy but also derives from a short-term view ripe for a backfire.

Bettors in New Jersey and Pennsylvania bear-hugged mobile wagering almost immediately. In both states, nine out of every 10 sports bets are placed via a mobile platform. That figure is nearly eight of every 10 in Indiana, which launched just nine months ago.

Those states respectively rank second, third, and fourth in the US in total handle since May 2018. Customers migrated to mobile solely on its merits: convenience, safety, and in-play betting.

Focusing on the pandemic’s wake to facilitate a legislative push for mobile would do a disservice to the industry and to lawmakers. Reflexive lawmaking also leaves a permanent escape hatch for opponents if the reason for the reflex fades.

Speaking of reflexive …

Even Neo from The Matrix is impressed by watching the gymnastic ability of pro sports leagues in the past two years.

Commissioners spent years decrying sports betting as a threat to the very integrity of their games. They backed PASPA until it collapsed on them, then emerged from its wreckage born-again into the warm glow of legal sports betting cash.

Hallelujah, praise Jersey!

They pushed for an integrity fee. When that flopped, they tried to rebrand it as a royalty. The industry laughed at their hubris.

How could leagues demand money for something they already supposedly did? Integrity means fans believing they are watching a fair competition. That central tenet of sports exists with or without legal betting beyond Nevada.

Integrity by any other name

Finally the leagues swapped both the integrity fee and royalty for the faux safety of official league data. The last laugh belonged to them when legislators in Tennessee, Illinois, and Michigan bought the need to mandate this repackaged product.

This time to reflect offers the chance to ask what role leagues will play in the expansion of US sports betting.

As they grapple with revenue lost during the pandemic and empty stadiums after it, leagues could return even more aggressive in seeking guaranteed money from sports betting. They might want that revenue badly enough to take the ironic risk of the public questioning their integrity.

The thinking goes like this: if sportsbooks legally must pay up to the leagues, doesn’t that give the leagues incentive to rig games to their most favorable outcome?

No, it really doesn’t. But perception being reality and all, leagues open themselves to the injury of such magical thinking when they force their way behind the sportsbook counter.

Which leaves one major question to ponder …

The perils of leagues becoming overly eager to wedge themselves into the sports betting industry must balance with their access to customers and marketing power.

The dilemma offers a stark contrast to that of a power broker more reticent on sports betting, albeit one who holds similar influence over the industry’s future.

Indeed, no group will affect the post-pandemic future of sports betting more than Native American tribes. While tribes do not operate as a monolith, their gaming industry is acting less urgently toward sports betting than commercial casinos have since 2018.

Starting with a word of caution

Any look at how tribal gaming will proceed on sports betting first requires acknowledging how deeply COVID-19 is affecting native people. This makes it difficult and perhaps folly to forecast how sports betting fits into tribal planning.

It is still possible, however, to look at the scope of the opportunity.

Tribal interests control the casino industry in California and Florida, which have a combined population of nearly 60 million people. Add in New York, where tribes also hold sway, and that figure increases to almost 80 million.

Sports betting juice worth the squeeze?

Tribes built a gaming industry that generates billions of dollars without sports betting, much of which funnels back to their underserved communities. They would need to reopen their state compacts to include sports and they would need to change federal regulations to add mobile beyond tribal lands.

Read that paragraph again if you still wonder why sports betting does not entice tribes like it does commercial interests.

An appetite for sports exists among some tribes but on narrow terms. California’s tribe-backed initiative limits wagering to retail sportsbooks. Connecticut‘s powerful tribes are discussing mobile with the state but are seeking exclusivity in offering sports betting.

Tribes negotiate from a strong position on this issue. Launching sports betting with tribes could require a different level of partnership and compromise.