A week before the legislature is set to adjourn, sports betting is a late addition to a broader economic development bill. Of note, there is already talk in the legislature of extending the session.

That’s big news, as Massachusetts is one of the most coveted sports betting states.

Even though Massachusetts has a population of around seven million, the state’s economics and high-performing lottery make it a hyper-appealing market for the industry.

Massachusetts also punches above his weight thanks to the presence of DraftKings, one of the early leaders in the legal US sports betting industry. DraftKings’ main headquarters are in Boston, which helps explain why Massachusetts was one of the first states to regulate daily fantasy sports. It also explains the unique approach to sports betting Massachusetts is considering.

Since passing a casino expansion bill in 2011, gaming expansion of any kind has long flummoxed the state. Multiple efforts to legalize online lottery, online poker and casino, and sports betting have all fallen flat. Not even DraftKings has been able to crack the Massachusetts code on gaming expansion. 

But, here’s why the current proposal could have a different outcome.

The COVID-19 Factor

COVID-19 is the ultimate wildcard, as the economic shutdowns and impact have left states in desperate need of revenue.

Under normal circumstances, sports betting would be considered a drop in the Massachusetts budget bucket, but when the bucket is nearly dry, every drop counts.

Pressing the gas pedal to the floor to pass legislation is just one example of how COVID-19 has accelerated sports betting in the US. In addition to the legislative alacrity, some states like Illinois and Rhode Island are relaxing their policies on mobile sports betting, and other states are fast-tracking their launches on online gambling (West Virginia and Michigan).

Looking Under the Hood of Massachusetts’ Sports Betting Proposal

The Massachusetts proposal is unique in several respects.

Three Types of Licenses

First, it would allow for a wide range of stakeholders, including qualifying online operators that can operate untethered from land-based gaming, what I will affectionately call the DraftKings clause.

In all, the proposal would create three types of sports betting licenses.

  • One license would allow the state’s land-based casinos to offer retail and online sports betting.
  • The second type of license would authorize retail sports betting at live racing venues.
  • The third type of license allows DFS operators that have been licensed in the state for at least one year and that offer sports betting in at least two other states to offer online sports betting.

Other states offer untethered online licenses (New Hampshire and Tennessee), but those states don’t have significant land-based casinos or racetrack operators. And that’s why Massachusetts’ proposal is quite unique.

Excise Tax and Integrity

As Dan Wallach pointed out on Twitter, the proposal has ten pages of integrity-related provisions.

One of those provisions is a 1% integrity fee payable to Massachusetts sports venues for all bets on games occurring within that venue.

Per the bill:

“each sports wagering operator shall submit to the commission the number of sports events or other events that took place at sports stadiums or other sports facilities physically located in the commonwealth and the adjusted gross sports wagering receipts collected from each such event. The commission shall impose and collect an excise equal to 1 percent of the operator’s adjusted gross sports wagering receipts from such events.”

Those funds are distributed by the state back to the venues, but the funds must be used “only for the purpose of sports wagering security and integrity.”

What Else Is in the Bill?

Here are a few other points of interest in the bill:

  • Sports bettors must be at least 21 years of age.
  • Mobile customers must be located in Massachusetts.
  • There is a prohibition on in-game prop bets on college athletics.
  • The bill mandates official league data on in-game wagers.
  • It also authorizes wagers on esports.
  • The bill calls for a 15% tax rate (on top of the 1% excise fee noted above).
  • It requires a $250K fee for a five-year license. An additional $100K renewal fee is required every five years.

Don’t Forget This Is Massachusetts

So, what are the chances the Massachusetts legislature passes a sports betting bill?

I would argue that it’s better than usual, but still far from a lock.

The Massachusetts Lottery has long contended that the state shouldn’t allow any form of online gambling without also authorizing the sale of online lottery products.

“It is disappointing that the House Ways & Means Committee did not include authorization of online Lottery as part of their most recent economic development bill, despite authorizing sports betting,” Massachusetts Treasurer Deborah Goldberg told local press. “As gaming and retail commerce both continue their rapid shift to online and mobile transactions, it is vital that the Lottery be able to sell products using these methods to keep pace with consumer preferences and demands.”

Further, the state’s casino operators have previously opposed the idea of untethered online licenses. 

In 2019 the trio of operators signed a letter that makes a case for mobile licenses tethered to land-based casinos:

“In order to spur continued growth and development in the industry, each casino operator should be permitted to partner with a limited number of mobile sublicenses. Sublicenses allow broader stakeholder participation while tying such participation to the strong probity and suitability imposed on casino licensees… Allowing for this limited sublicensee system allows accomplishes these policy goals without diluting the value of the casino licenses.” And finally, this is Massachusetts, and for all of its progressivism, there’s still a very puritanical streak when it comes to things like gambling

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