Pandemic Further Complicates Sports Betting Legislation Hopes

Halfway through what sports betting advocates hoped would be the most fruitful year for new legislation, the COVID-19 pandemic has further tangled what is already a difficult legislative process.

The pandemic, which has curtailed and shuttered legislatures nationwide, has revived interest in sports betting as a new revenue source, but these efforts have largely faltered as elected officials focus on other priorities. Meanwhile, rising budget deficits and shifting public attitudes have not been enough to overcome the intrinsic political difficulties of passing new gaming legislation.

Virginia and Washington have so far been the only states to pass substantial sports betting legalization bills this year, both completing the bulk of the legislative process before the full throes of the pandemic. Three states will place sports betting legalization referendums on their respective 2020 ballots, but all require follow-up bills in 2021.

In the handful of states legislatures still meeting this year, sports betting bills have so far gained little ground. Political and stakeholder rivalries, misinformation as well as potential second round of economic and social shutdowns have fortified the intrinsic difficulties of passing sports betting legalization.

Speaking at an industry videoconference Tuesday, FanDuel Government Affairs Director Stacie Stern said these obstacles, plus the pandemic’s alteration of the 2020 legislative calendar, explains many of the sports betting legislation delays across the country.

“When you have things at play like politics, then looking at trying to introduce legislation that still today could be somewhat controversial, even if it’s going to generate revenue and potentially help the state out, it’s difficult to get people on the same page,” Stern said.

Political Dynamics Still Shape Sports Betting Legislation

Lawmakers in recent weeks have scrambled for any new revenue sources in the face of looming budget shortfalls, but coronavirus-induced political divides have further complicated state-level politics.

Stern told SBC Digital Summit attendees Tuesday that divisions in Ohio sports betting efforts between Republican, who control both chambers of the legislature, and Democrats over handling staff in the statehouse has exacerbated tensions. Gaming typically has bipartisan, bicameral support in Ohio, but with proponents still divided about sports betting oversight, additional splits could obfuscate the legislation’s prospects.

Divisions over sports betting legislation this year have not solely been between parties.

Facing a multibillion-dollar budget shortfall due to the pandemic, California sports betting backers reintroduced a statewide mobile sports betting constitutional amendment earlier this summer. Native American tribes decried the proposal, which would allow tribal casinos to take mobile and in-person sports bets while permitting expanded offerings at state cardrooms, saying it unfairly rewarded the cardrooms for 20 years violating an earlier constitutional amendment.

Sponsors pulled the bill before it reached the floor.

Sports Betting Legislative Priorities

Before the pandemic, legal sports betting generates several million dollars monthly for mature markets such as New Jersey and Pennsylvania, which has encouraged lawmakers in other states to legalize wagering. Any state would welcome a few million extra dollars, but for most, it remains a proverbial drop in the bucket of multibillion-dollar annual budgets.

This partially explains why no state has passed a sports betting bill since the force of the pandemic began in March. Louisiana, Maryland, and South Dakota all passed voter referendums for the respective 2020 ballots, but no statehouse has passed a fully fleshed-out bill. For many elected officials, an inherently complex sports betting bill’s time requirement is outweighed by the time and political capital needed to pass it.

This played out in Kentucky, where gaming bills already faced in an uphill climb in the conservative General Assembly, and sports betting was excluded from the final budget.

In Georgia, budget shortfalls reinvigorated stalled gaming expansion measures, but none passed as lawmakers prioritized other measures in the waning days of its protracted 2020 session.

Like Ohio, Massachusetts also has a year-long session, but Massachusetts sports betting legislation has stalled in Boston just as it has in Columbus as lawmakers prioritize more pressing matters. On top of budget shortfalls, elected officials must deal with rising healthcare expenses from the virus as well as increased public attention to social justice matters.

“It’s not top of mind for a lot of these legislators who are looking for other revenue bills, or maybe healthcare, or maybe crime bills that have now risen to the top of the priority list,” Stern said.

Other Issues

More than two years after the Supreme Court repealed the federal sports wagering ban, lawmakers are still struggling with the x’s and o’s of sports betting legislation, industry observers say.

The proliferation of unlicensed, offshore bookmakers leaves many believing sports betting is already legal in their state, EK Gaming Senior Analyst Becca Giden said Tuesday. Marketing campaigns and app access only compounds the problem.

“A lot of customers, lawmakers and regulators have a sort of gray area of understanding about the legality of offshore apps and whether sports betting is already legal in their state or not.” Giden said. “And if you’re not already legal, you believe that you’re doing the right thing because the (federal ban) was overturned. You’ve read just enough to be dangerous.”

Once lawmakers understand that the federal ban simply permits state-level sports betting laws, not federal legalization, Stern said it can be difficult to explain the key taxation, implementation, access, and regulatory structures a competitive market requires. The more than 20 states with legal sports betting form an incongruent patchwork of disparate regulations, tax rates, and bet types.

The most successful states in the industry’s eyes created competitive, tax-friendly marketplaces that encourage widespread participation. However, states such as Tennessee have handicapped their markets with onerous restrictions and taxes.

“While we look at this from our perspective and say, ‘this is why you should do what they did in New Jersey, what they did in Indiana, what they did in Colorado’, but there’s a real pride of authorship that comes from people who want to sponsor legislation in some of these States,” Stern said.

This trend should continue when lawmakers in the roughly two dozen states still considering some sort of sports betting bill. Potentially including the few bills still under consideration in 2020, the remaining states with sports wagering interest will likely continue on divergent paths over key issues should sessions begin as scheduled in 2021.

With a growing portion of Americans, and their elected representatives by extension, supportive of gaming expansion and sports wagering in particular, the timing for those officials’ return to governing business remains perhaps the biggest variable to sports betting’s expansion.

COIVD-19 cases are rising in most states, further clouding not just new legislation, but the opportunity to pass it while most statehouse doors are closed. Even as teleconferences and remote conversations become more normalized, the complex legislative process is still largely determined by face-to-face discussions, said John Pappas of industry advocate iDEA Growth.

“I think it’s really kind of being a wait-and-see in a lot of states to see what their path forward to legislating is, not to mention the political fights that are going to have to go on to get something like this done,” Pappas said. “We have to actually get them together to meet, to have those fights to begin with, and that is something that is very much unknown.”