Slow Your Roll On Massachusetts Sports Betting | LSR 163
Welcome back to the Legal Sports Report Podcast, Ep. #163! Despite reports that Massachusetts could launch sports betting soon, regulators in the commonwealth threw cold water on that idea. (1:20) We also talk about the latest on ESPN’s plans for sports betting (5:18), the big increase in sports betting activity for NFL Week 1 (8:14), and the entrance of Pinnacle into a regulated market in North America (15:43).
Adam Candee (00:09):
Hello, and welcome in to episode number 163 of the LSR Podcast. I’m Adam Candee, sitting in the host chair for Matt Brown today. Joined as always by some of the brightest minds in the gaming industry. Dustin Gouker is here, and Matthew Waters is joining us. This week, we’re going to talk, again, we do this often, but we have reason to talk about ESPN and sports betting and some comments that stirred up a little bit of interest this week. Some data from GeoComply that shows a big, shocking statistic: People like betting on football. We’ll get to all that as we move along.
This reminder that if you’re watching us on YouTube, we appreciate it, thank you. Go ahead and hit that like button, subscribe to our videos. It helps us get the word out to everyone else along the road as well. You of course can subscribe to the podcast’s audio format on Apple, Google, Spotify, all of the places you get your podcasts. Dustin is on Twitter @dustingouker, Matt is on Twitter @bymatthewwaters, I am @adamcandee, and as Matt would tell you, that is two E’s and no Y.
Is slow Massachusetts sports betting rollout because of mistake in legislation?
Let’s start at the top, guys, with a state launch that I think is the one that will probably garner the most attention for the next few months here. And the questions are around the state of Massachusetts, and when are we going to have sports betting in Massachusetts? I know you guys, as sports fans, are absolutely stunned that there was a report on Boston’s Sports Talk radio that turned out not to be true. I don’t know where my faith in the news media is going if I can’t trust what happens on WEEI and Boston Sports Radio, Dustin. Turns out the Massachusetts Gaming Commission shut down that report and said, everybody simmer down now, it’s not going to be that fast.
Dustin Gouker (02:00):
Yeah, there’s been a lot of speculation, like you said, we have not a whole lot going on in terms of launches. We’re looking at … We know Ohio, we know that, so there’s no new mystery there. Maryland, as we have discussed ad nauseum on this podcast, who knows, we don’t have a whole lot of data there. So it’s Massachusetts. People are really, granted, looking at what Massachusetts is going to do. It is not happening soon, yes. So the radio reports that it could happen within a matter of weeks. I think we all could’ve told you, without the gaming commission, that that was nonsense. There’s some operators who believe there’s some aggressive timelines. In an absolute best-case scenario, maybe later this year. I think that’s even overly optimistic. I think we’re likely looking sometime early next year.
But yeah, this is with the city as big into sports as Boston is and Massachusetts and everything going on, Patriots, the Celtics coming up, people are interested in this. This will be a big launch, but yeah, you got to slow your roll. Gaming commission in Massachusetts, I’ve talked to them for a long time, it’s definitely one of the best ones I think in terms of looking at this issue. They’ve been thinking about online gambling and sports betting for a long time, but they’re also not going to rush it just for the sake of rushing it. So yeah, you’re not getting it in the next few weeks. If you heard that report, you’re likely looking at months in Massachusetts.
Adam Candee (03:22):
And Matthew, as we look at the state of Massachusetts, everyone thinks, well, DraftKings is headquartered there, so DraftKings will be the one to push everything through. And they kind of forget that there are land-based casinos in Massachusetts as well. That probably have better existing relationships, not necessarily better than DraftKings, but longer-standing existing relationships with regulators. And they also have the ability to get retail sportsbooks up sooner than this mobile timeline.
Matthew Waters (03:53):
If the regulators choose to go that way, we’ll find out this week. So probably by the time you’ve listened to this, it’s already happened, but they may be deciding Thursday on whether they stand that up separately or not. The point here is that we are, what? A month and a half after the bill has been signed. And we do not have a launch date yet. And of course we want the launch date. We want to be able to write about the launch date. We want to be able to tell everybody about the launch date, but the casinos and operators want the launch date, too. They were very clear. And they said, once we know when we can launch, it’ll be about 90 days after that, the casinos said. And so that’s really what we’re waiting on right now. Hopefully this meeting’s going to tell us, but you know what, the last three meetings or so we’ve said, hopefully we find out more, and we just haven’t yet.
So yeah, Massachusetts, the casinos are definitely, I would say in control there when it comes to the retail licenses, they’re definitely the ones that are being spoken to the most, and the racetracks too also have the simulcast tracks have two of those as well. So yeah, the retail partners are definitely leading the conversation right now it seems, but lucky for us there are more roundtables scheduled that the mobile operators will come into as well. And that’ll be another few hours of basically not moving anywhere for the general public, but more information for the commission. So still really in a long, long waiting phase here.
Disney CEO continues to create confusion about ESPN’s sports betting plans
Adam Candee (05:18):
Yeah, I think that the operators are probably the ones who are most disappointed that they are missing all of these weeks of people in the Massachusetts area, wanting to bet on the Patriots, because looking at how we saw the Patriots come out in week one, the operators will be making a lot of money on everybody trying to bet New England right now, so we’ll see how quickly that comes along. Matt, another subject that we’ve talked about for a long time when it comes to will it, won’t it, how long is it taking, is ESPN and sports betting. We of course have had this conversation on this podcast numerous times. Everybody got a little stirred up this week with Disney’s CEO, answering a question discussing, working on building something for sports betting, but was it really as much of a revelatory statement as some played it up to be?
Matthew Waters (06:05):
Yeah, I don’t think so Adam. We have too many comments from Disney, from their earnings calls and various investor conferences that suggest that they’re working through partnerships here. Basically, this is what happened. He was asked at this fan expo, if they were working on an ESPN sports betting app, and Bob basically said, we’re working very hard on that, was his quote, which does make it sound like they are working on building something from the ground up. I think that’d be silly. I think it would probably be a little too expensive. There are way too many people that surely are interested in working with ESPN to do it that way.
And if you look at what Bob said on the fiscal third quarter call in August, he said, we’re working hard on it. We hope to have something to announce in the future in terms of a partnership there, that will allow us to access that revenue stream and also make sure that our guests have their needs met. That all tells me that we’re going to see something that’s some kind of partnership even if you don’t see a partnership name on it. It’s probably not being built from the ground up from ESPN.
Adam Candee (07:07):
Dustin, there are already deals in place for ESPN with DraftKings and with Caesars. You see the Caesars odds on screen and quoted regularly. It would seem almost counterintuitive to everything we’ve heard that ESPN would be going it alone.
Dustin Gouker (07:21):
Yeah. I mean, there was a lot of ink dropped about these six, basically six words from Disney CEO that, like Matt said, he’s basically said this before, just he’s answering a question on the fly. There’s no way ESPN … I feel like that would be a pretty big secret for ESPN to be building an app and we don’t know, not that we know absolutely everything that’s going on in the sports betting industry. But if that was happening, there’d be too many people working on it. You just go look at job listings like is ESPN building an app? That’d be pretty easy to see that they’re spending … putting hundreds of resources on building something, because that’s not expertise that exists in Bristol right now or in Disney. So yeah, there’s a lot of spilled ink about this, but I think what all reporting before, ESPN is working on it, that’s through a partnership and not just building its own app from scratch.
GeoComply opening weekend NFL data shows massive interest increase
Adam Candee (08:14):
Well, if they’re building their own app, we of course know that they’re building it to try to capture as much football betting as is possible. Not only do I enjoy getting this data from GeoComply, even when it doesn’t surprise us all that much, but I love the data visualization. I love watching these pins fly in from all over the place to show us all of the places that someone tried to place a sports bet using one of the mobile apps and the geolocation check was performed, and the data we got Dustin suggests that a lot of people were having their location checked.
Dustin Gouker (08:48):
My favorite content in sports betting, and maybe I’m just a nerd, is seeing these pins drop from GeoComply. It’s such great content and we all … It does capture the imagination. It’s like, OK, it’s in real time, you can see what people are doing and trying to bet. If you do a time lapse of that, too, it’s just fascinating just to see people … And it also shows that all this works. Anyway, the data that we got from GeoComply, first weekend of NFL, 103 million geolocation pings around that first weekend of betting on the NFL. That obviously sounds like a lot. It is a lot. So let’s be clear on what this is. This isn’t necessarily a bet or just a login, this is people who are on an app, working, looking at it. And then the app, there’s something, the app is triggered that it needs to make sure that somebody is in or out of a state where you can bet or can’t bet, make sure that person is being geolocated properly for the operator.
So it is a lot. We have, year over year, that’s 103 million versus 60 million. So that’s a huge number. Obviously a lot of that came from New York, which was not live for the first weekend of NFL season. Last year, I think almost 16 million of those pings are New York, notwithstanding that there’s probably some people in New York who are trying to log in and couldn’t do so last year. So really interesting data. So not all of that is just New York though. That means just people are betting more, really in existing states. Yes, we have Kansas. We have a little bit more activity out there, but this is people engaging with the betting apps more, is part of that narrative, which has always been the story, not just getting people in, but also having the second-screen experience with betting. I think you see a little bit of that in the data from GeoComply.
Adam Candee (10:25):
And Matt, as we talk about geolocation checks, for those who are not as deep into the process as we are every day, these are a primary way of making sure that not only do you know your customer, but you know where your customer is. These apps are essentially saying, you have to be in the state where you are legal to be betting. It’s not a matter of where you’re a resident of. It’s not a matter of what you call home. It’s a matter of you need to physically be within the borders of that state. And I think somewhat interesting in this data is that we see, not only the successful geolocation checks, but we see the ones that are unsuccessful, as well.
Matthew Waters (11:05):
Yeah, that’s absolutely correct. And you saw it with the Missouri and Kansas border. All these poor folks in Kansas City, Missouri, that when Kansas launched, they wanted to try to bet and they just couldn’t. Unfortunately for them, GeoComply is just too good at what they do, and VPNs aren’t going to beat it, either. And it’s interesting because as you get closer to a state border, GeoComply starts to check you a little bit more often. If you’re smack dab in the middle of Kansas, they don’t need to check you every two minutes to see if you’ve left Kansas. Whereas if you’re a little closer to the border, they do that a little bit more. So it may not have been as many people as those 16,000 or whatever it was checks from Kansas City, Missouri, on day one in the first eight hours. But yeah, it really is interesting to see all the people that are outside of the state, they’re shooting the shot and they’re seeing if they can get through, and it doesn’t. That’s a good thing for the regulated industry.
Will Ohio sports betting applicants missing paperwork launch day 1?
Adam Candee (12:03):
And we talk about Toto, I don’t think we’re in Kansas anymore. Well, you’ll know. You’ll know whether you’re in Kansas anymore. GeoComply will let you know. No, no, nope. Oh, nope. Ah, you’re in Missouri. Sorry about that. Nope, can’t place a bet. You are no longer where you were supposed to be. You are not able to place a bet legally anywhere in the state of Ohio yet Matt. You’ve been covering this story for quite a long time. You would think people in Ohio, they’d be excited. Sports betting is coming soon, Ohio State’s playing well, the Browns won this weekend. There’s some people in Ohio, though, who are not very happy right now.
Matthew Waters (12:40):
That would be executive director Matt Schuler. Basically, what happened was when it came time to turn in all of these applications for the rolling windows, for the people that wanted to be live on January 1st, it was explained multiple, multiple times, all that information that will be needed. And that includes documenting like the holding companies and key employees and everybody involved that has a stake in these companies. And about 33% of the applicants did not do that. And so they received a bit of a tongue lashing from Matt Schuler that basically said, look, you have until October 5th to get this information to us or we’re just not worrying about you for day one. They have too much to do. They have, right now, there are more than 1,300 lottery facilities that are pre-approved. They’ve already approved 500 of them. There are so many applications for the Ohio Casino Control Commission to get through.
And that doesn’t even include all the employee licenses and everything that are due in November, just flat-out property licenses. There are a ton of them. And so basically they just don’t have the time to be messing around with this. They said they were chasing people down to get the information, and they still couldn’t get it. So yeah, they did not tell us the companies that didn’t do it correctly. We all obviously wish they did, that would be a great list to have. But yeah, so we’re what? We’re three weeks away from these companies having to have that information in, or there are 24 mobile operators that want to go live on day one right now and that’s all at risk.
Adam Candee (14:16):
Dustin, this past weekend I was talking to someone who runs one of the sportsbooks in Las Vegas that has an interest in other states. And this person was saying to me, there are times we’re talking about what we want to do in this state or that state. And we have to say to each other, wait, can we do that? We don’t know, is it legal in that state? The regulations state to state are certainly something that we know operators are learning how to deal with different regulatory bodies. And it seems like with Ohio, with all of these applicants, we might have a lot of new people to the game here who don’t understand just how strict these processes can be.
Dustin Gouker (14:50):
Yeah. I mean, this isn’t easy. There’s huge compliance departments in all of these major sportsbooks. And even if you’re a little one, this is not easy to do. It is a huge part of … Being a part of the regulated market is being able to deal with this. There’s also third-party companies that help you make sure you’re doing everything that needs to be in compliance in any given state, because this is not just nationwide US sports betting. Every state you have to file, to be licensed, you’re paying taxes, you’re paying licensing fees. This is complicated.
And again, one of the advantages that the offshores have over the regulated market is they don’t have to deal with any of this. It’s not nonsense, but it’s a lot. There’s a lot to go on, that goes on. Just to get in … This is part of the cost of doing business is being able to deal with the regulatory scheme that has been put up across the United States. And it’s a high barrier to entry, but that high barrier also creates what should be a sustainable market for sports betting moving forward.
Does Pinnacle Ontario sports betting license foreshadow US plans?
Adam Candee (15:43):
Well, that’s interesting that you bring up the bars that an offshore might have to clear in order to be in a regulated market, because when we look to our friends in the great white north, hello to number one listener Julian, we see that one of the most reputed and I’m just going to leave reputed as the adjective and we’ll let everybody else fill in what kind of reputed they’d like to attach to it. But Pinnacle, one of the market-making offshore books, one of the biggest names in the global market, is transitioning to the white market in Ontario. And Dustin, I know you and I are the old heads who look at these things and wonder why people aren’t screaming from the mountain tops when these things happen. And yet I am stunned by the pin drop that essentially happened here with Pinnacle getting into the Canadian market.
Dustin Gouker (16:34):
I mean, I don’t know, maybe it’s not the … It used to be this way. There was nothing that was catnip to gambling Twitter — we talked about gambling Twitter a lot recently — than Pinnacle, which is this different model, low margin, better prices, take a lot of action, but comes with a lot of history that is kind of now glossed over. There’s stories going out there that kind of glossed this over, but Pinnacle has not been in the US market, and that’s not because they don’t want to, but because of their history and this goes back to our old … We’ve been part of this for a long time. This is the old days. Pinnacle pulled out of the US around the time that the Unlawful Internet Gambling Enforcement Act was enacted in the 2000s. So they were serving the US, most of their activity was in the US at that time, reportedly. They have not been a part of the US regulated market. So it is, dare I say, almost shocking to see them be a part of a regulated market.
We have said many times Ontario is different. They are taking the gray market that is people, these operators that have served the province already, and moving them here so they realize that gain in terms of revenue and channeling them to an onshore regulated market. But I want to hear your thoughts because it’s both shocking to see Pinnacle one, get into the North American market for the first time as a regulated entity, and two that it is … Yeah, there hasn’t been a whole lot of talk about this from that standpoint of the history of Pinnacle.
Adam Candee (18:07):
It’s the history that really fascinates me here, Dustin. And this is why, because we talk about Canada and Ontario transitioning some of these companies from the gray market into the white market. Well, here’s the difference between when we talk about Pinnacle and when we talk about 365. Bet365, which was in the gray market in Canada, is licensed all over the world. It’s a UK-based company that has gone through the licensure process in a lot of places. Whereas, Pinnacle has a history of being an illegal operator inside the United States.
And I know using the word illegal is going to get some of our friends out on the internet really fired up, but that is what it is. It is in violation of federal law, that some of the money has been moving back and forth, et cetera, et cetera. So, when we talk about Pinnacle coming in, to me guys, that is a major difference because that’s not transitioning the gray market, that’s transitioning the black market. And not the first time we’ve seen that sort of activity.
When it comes to North America, we’ve seen 5Dimes trying to wash their name when it comes to the United States market. And now we see Pinnacle trying to do it in Canada. Matt, I’m curious your perspective. You deal with a lot of state regulators and talking to them about how they view different companies. Do you think there will be any credence given to Pinnacle getting itself, essentially, a white market status in Canada were they ever to try to get into the United States?
Matthew Waters (19:32):
It’s a great question. When these states are regulating, they will look to what people have done in other states, and they’ll take letters from other regulators saying they have not been accused of this. They have listened to all of this. And that usually helps when there’s like a temporary license procedure and all that kind of stuff. I don’t know if one OK from Ontario is going to erase the history of Pinnacle. It’s certainly a check in the pro column, but that con column reaches all the way to hell down. So I don’t know how much this is really going to matter to regulators. We know some regulators have straight up said, no way. Can a black market come in? We’ve not heard from plenty of regulators about how they would deal with this, though. So it’s a fair question. And it’s one that we might get an answer to sooner rather than later.
Adam Candee (20:31):
Yeah, we’re certainly going to be keeping an eye on that. And if you want something else that you can follow all the way the hell down, there are 163 episodes of the LSR Podcast. You can get all of them, all the places you find your podcasts. Subscribe, rate and review; we want your support and we want your help getting the word out to other people. Matthew Waters, Dustin Gouker, thank you guys for your time. We’re back next week with our friend, Matt Brown. Thanks for listening to the LSR Podcast.