An Analysis of Gaming News and Trends by Ken Adams
Second Quarter 2018
The Law of Unintended Consequences
Bang, with the stroke of a pen the highest court in the land ended the federal prohibition on sports betting. The upended law is going to open the door to consequences no one expected. It is now a matter for the individual states to decide for themselves how to govern gambling on sports. That is not surprising to anyone who has been following the issue for the last year, but some of the subsequent developments could be very surprising; I certainly have been startled by some of the implications. I had expected the new legal sports wagering to be very like that in Nevada, and dated as my experience is, it is my only model. Although in retrospect it was silly to think the modern version of sports betting would be like my 20-year old model. After all, nothing using technology is the same today as it was twenty years ago. However, even if my crystal ball saw all of the implications of modern technology, I could never have imagined an American sports betting industry governed by invaders from England.  
In December, the U. S. Supreme Court heard oral arguments in NCAA v. Christie. In that case, the National College Athletic Association, the NBA, NFL, NHL, MLB and the Department of Justice sought to prevent the state of New Jersey from implementing the state's 2012 Sports Wagering Act and named the governor of New Jersey, Chris Christie in their suit. The plaintiffs argued that the New Jersey law violated the federal Professional and Amateur Sports Protection Act (PASPA) of 1992. New Jersey argued PASPA violated the Tenth Amendment to the United States Constitution, maintaining that the right to regulate and tax sports wagering was reserved for the states as it had not been expressly delegated to Congress and the federal government.
 
On May 14th, the Supreme Court reversed a lower court ruling and declared PASPA to be unconstitutional. The ruling cleared the way for New Jersey to legalize, regulate and tax sports betting. The court's decision also opened the door to any state that wishes to legalize wagering on athletic contests. It has only been two months, but already seventeen states have begun the process to legalize sports gambling within their borders. A report by Eilers & Krejcik, predicts that thirty-two states will have legalized the activity within five years.
 
Gambling on sports has started already. Delaware became the first new state to offer a full menu of sports wagering. It has had parlay cards on NFL games, a limited form of sports betting, since 2009. Now under a new law, it has full blown betting on individual contests in all sports. Governor John Carney of Delaware placed the first single game wager on June 5th , betting $10 on the Philadelphia Phillies to beat the Chicago Cubs. Nine days later, New Jersey Gov. Murphy placed the first legal bet in his state at Monmouth Park Racetrack. Murphy bet $20 on Germany to win the World Cup and $20 on the New Jersey Devils to win the Stanley Cup. The first bets placed at a casino in New Jersey came on June 28th at the Ocean Resort Casino in Atlantic City when actor Mark Wahlberg placed a bet on the Philadelphia Eagles to win the 2019 Super Bowl. A week later, Hard Rock Atlantic City also started taking bets.
 
Up to this point, the story is unfolding in the way I might have predicted. First a state legalizes sports betting, followed by the propagation of regulations, granting of licenses and then casinos begin accepting wagering on individual games, future wagers on championships and a few in-game propositions such as the number of tackles, strikeouts, over-under and half time scores. That is the way it has been done in Nevada and so far in Delaware and New Jersey, but that is not the way it will be down the road.
 
The states will legalize, tax and regulate the betting, but English bookmakers and technology will shape the industry in the post PASPA era. The English bookies are rushing to get into the action in the U. S. Probably nothing since the Beetles hit our shores in the 1960's will have a larger impact on our culture than the arrival of the bookies from Merry Old England. In the British Isles people have been making bets on sporting events for a long, long time and the bookies know their trade. Last year, the 65 million citizens of the UK bet $20 billion with their bookies. Because betting in England has a long history and is much less regulated than Nevada, English bookies have developed hundreds of propositions for every event conceivable and taken the betting as close to the action as they can get. During the progress of a game, betting is big, allowing the gambler - or punter as the English call them - to keep in action all of the time and keep his blood racing, even when his team is losing. He can bet on the next foul, the time before the next score, the number of times the spectators burst into song or the color of knickers on any given player; everything is fair game. Take for example, the Sport Index wager on the number of times the ball will cross the line without scoring a goal; it has nothing to do with the outcome of the game, but keeps the better engaged and excited right up to the final whistle.   A spokesman for William Hill told the New York Times that it is not unusual for there to be 500 different betting lines on a single game.
 
The variety of events and the immense number of propositions in the English gambling world is totally unlike anything found on this side of the Atlantic and the major British betting firms are all competing for a piece of the pie in the United States. In 2011, William Hill became the first UK betting firm to come to America. It spent over $50 million buying the Club Cal Neva Race and Sports, American Wagering and Brandywine Bookmaking in Nevada,acquiring 159 betting locations in Nevada. At the time, the company had 2500 betting parlors in England, but needed new territory for further expansion. The firm was wagering that Nevada could be a beachhead in the battle for the U.S. sports gambling. It was a shrewd wager; in 2011 very few people believed sports betting could ever be a national industry here.
 
Ladbrokes, Bet365, Sky Bet and other English firms have joined William Hill looking for American partners. Partnerships between bookmakers and licensed entities are likely to be the common and dominant model. The licensees will need the expertise and risk taking capabilities of the bookmakers. The bookmakers will need the licenses and the bricks and mortar locations since a licensed partner eliminates the need for hundreds of millions of dollars of investment in infrastructure and the long and expensive casino licensing procedures. Even in Nevada, single stand-alone casinos are unable to afford to operate a book; that is why William Hill has been successful here. The large corporations like Caesars, MGM and Penn National could manage their own book in house, but for the rest of the industry, it is too expensive and risky. Also, with few exceptions, most of the initial legislation will grant exclusive rights to the existing casino licensees.   Some states may want to operate the book themselves through a public entity such as the lottery.
 
As significant as the English sports betting culture is going to be, the impact of technology is going to be more pronounced. Technology is not a single thing and its impact will be multifaceted. The most visible effects of new technology will be the media with its 24-hour coverage of everything. Sporting event broadcasts, sports talk and a whole new array of sports gambling programming will be streaming across the land all day, every day. And like all television it will reflect society and act as an agent to shape it at the same time. Television has always been important, but not critical for betting; a score posted after the game sufficed. In 2018, even before gambling begins to impact coverage of sporting events, casual fans and degenerate gamblers alike demand to see the action, not just be told the score.The games are available streaming online, on special sports networks and through the hundreds of cable channels available to anyone with a couple of hundred dollars a month to spend. Besides the games, there are a mind numbing number of talk shows analyzing everything that can be analyzed. That talk programming will increase a lot under the influence of sports gambling.
 
When a sufficient number of states have legalized sports gambling to make it a national industry, the talking heads will begin discussing odds and probabilities on all of the games and players in earnest. The existing programs even with an adjustment to the new gambling reality will still be pretty much "old school"- that is, they will use the data that has been the common fodder of sports for years, the conventional metrics. However, there will be new programming designed and conceived using new data that will be very different and will come from the English model. In England a legion of onsite observers are employed to send back moment to moment, in-game data, making things that have never been measured before available for wagering propositions.
 
The technology used to capture and disseminate this data is having a profound impact in other countries and will, in time, here. In fact, according to an article in the New York Times, capturing and selling all of the possible data is becoming big business. The Times speculates that the professional leagues will try to control the data, but it seems highly probable that the betting firms will be generating and controlling their own data. That of course raises a question of integrity of the information. How is the bettor to know the data presented is true and an accurate accounting of events on the field. The control and distribution of the data is going to be as important as the game that will become just a data generator.
 
A new era does not necessarily mean a complete end to the old one. The legalization of sports betting does not guarantee an end to illegal betting. The illegal books will still have an edge on the legal books. Without paying taxes or undergoing licensing, illegal books will be able to offer better odds. As everyone who follows the action knows, the odds are the thing; the best odds for the gambler will always have a ready market. Although not new, this is another place where technology creates a unique event; games and betting opportunities are online for anyone looking for them. The illegal books will be using the same type of data as the legal ones, data they capture on their own. Will it be trustworthy? That question is going to loom larger for all sports betting as the world follows England into the land of quirky wagers based on quirky data.
 
Besides the illegal sports books, there is another wild card in the deck. Lotteries have different rules and when combined with today's technology, sports betting lotteries may grow to be very significant. The Oregon lottery is contemplating jumping into sports betting in cyberspace. The lottery thinks it can develop a sports betting app that will put a betting kiosk in the hand of anyone in Oregon who wishes to make a bet. The wagers will not be as sophisticated as those offered by the bookies, but they will be ultimately more convenient. In many states, the mandate of the lottery permits expansion into other areas, such as VLTs or sports betting without any further legislative approval. Lotteries can easily become the loose cannon of the industry, very much as the lottery in Pennsylvania has done by expanding its menu to include casinos games including slot machines. The casinos in Pennsylvania are crying foul, but in the first month the lottery generated $24 million in wagers. Oregon is likely to be the first lottery to pursue sports betting and without an existing casino industry to challenge it, the Oregon lottery may be taking phone bets very soon.
 
Illegal books, constant streaming of games and discussions, new data and unusual propositions are shaping sports betting in ways no one could have anticipated 20 years ago. They are also factors that are unlikely to get much consideration with ill-informed lawmakers trying to craft laws that suit their political agendas. The lawmakers are using old, simplistic models of sports betting to craft their vision of the future. They are going to pass laws that will fail to take into account both the culture of European sports wagering and the advanced technology and new forms of data that will be in play. Except for the English bookmakers, no one, not the Supreme Court justices, the governors of New Jersey, Delaware and Nevada, the professional sports leagues, the players or the average Joe in the street anticipated all of the possible consequences of the Supreme Court's ruling.
 
But that is just my opinion, isn't it?
 
Ken Adams