How Casinos, Lotteries, And Sports Leagues Have Shaped Sports Betting Laws

We’re approaching the two-year anniversary of the Supreme Court striking down PASPA, and my oh my, how things have changed since May 14, 2018.

On May 14, 2018, a single state, Nevada, was offering single-game sports betting. Fast forward to today and that number has grown to 14 states. Six more states, as well as the District of Columbia, have also legalized sports betting and are progressing towards a launch.

And then there are the 23 states with active sports betting legislation that would either legalize or expand existing sports betting in the state.

Suffice it to say, legal sports betting in the US is here to stay.

That said, it’s a work in progress, with a hodgepodge of different models being tested at the state level. The reason for the nonuniformity is simple, the current sports betting landscape is being shaped by a small number of stakeholders, and these stakeholders have varying levels of pull in different states.

Stakeholders include daily fantasy sports companies, European operators, and media companies, but the big-three stakeholders are:

• Casinos
• Lotteries
• Sports Leagues

The influence of these entities has led to some less than desirable policies as each is trying to position itself to control the space.

Most States are Tethering Sports Betting to Existing Gambling

Casino operators are guiding sports betting policy in many states, and that shouldn’t be a surprise.

From capital investments to ongoing revenue to jobs, casinos are strong economic partners with the state. So, when it comes to expansions of gambling, the casinos don’t just have a seat at the table, they tend to sit at the head of the table.

In some cases, they’ve been granted exclusivity, in others, it’s more of an unspoken rule. With that in mind, it should come as no surprise that casinos want to oversee sports betting. That could mean retail-only, limitations on skins, or tethering online licenses to brick and mortar casinos.

Lotteries Granted Monopoly Status

But not every state has casino gambling. In their absence, state lotteries are the ones calling the shots.

Lotteries have been even more territorial, which has led to monopolies in Delaware, Oregon, New Hampshire, and Rhode Island.

Working with a single vendor for a specific product is what lotteries are used to, so it’s not too surprising to see them taking this approach with sports betting.

The consensus among the industry is that a sports betting monopoly is bad for everyone. The lack of competition leads to apathy from the operator (they’re only competing against themselves) and limits consumer choice. That makes it difficult to acquire new customers and shift spend from illegal to legal markets, and by extension that limits the amount of money the state can generate from sports betting.  

What the Leagues Want, the Leagues Get?

20 states and the District of Columbia have legalized sports betting, and an integrity fee has been included in exactly zero of those jurisdictions. But that doesn’t mean the professional sports leagues have struck out entirely. They might be o-for-21 on integrity fees, but if an integrity fee is seen as the starting point for negotiations, the leagues have done alright in a few locales.

Three states, Tennessee, Illinois, and Michigan have given the leagues some oversight on bets and mandated official league data for certain in-play wagers.

And that’s a trend that seems to be gaining momentum, considering all three of those states legalized sports betting somewhat recently.

Prohibitions on In-State College Betting

One trend that has been present from the outset is a prohibition on in-state college betting. A policy the NCAA has pushed for, even though no one in the industry believes the policy is overly effective or even makes sense.

Wave 1 states like Delaware, New Jersey, Mississippi, Rhode Island, and New York all prohibit betting on in-state college games.  Wave 2 states like Iowa, Oregon, New Hampshire, Indiana, Tennessee, Illinois, and Colorado followed suit. And plenty of states with active legislation have similar provisions.  

What Does the Future Hold?

This is the current state of affairs in the US, but as we’ve already seen, the space is ever-evolving.

If the DraftKings and FanDuel sportsbook continue to dominate the markets they’re active in, they’ll likely gain more leverage in other states. But will they be able to maintain their status in the US sports betting hierarchy?

Getting shut out of a major state or states could have negative consequences and allow other operators to rise to the top.

And of course, there are still some sleeping giants in Europe that could place their thumb on the scale, either through increased market share (or spend) or by partnering with major media companies or perhaps sports leagues or teams in the US.  

As Alun Bowden, one of the best European analysts has pointed out many times, what’s true today isn’t necessarily going to be true tomorrow. It’s difficult to stay on top of the gambling mountain.

Basically, the future of US sports betting is still unwritten, and it will be fun to watch it play out.