WV Lottery Commission Approves Sports Betting Regulations

The West Virginia Lottery Commission approved a 20-page set of sports betting regulations during a meeting yesterday to clear the way for licensed casinos to begin taking sports wagers. Casinos will need some time to comply with the detailed regulations approved yesterday, but West Virginia sports betting is now imminent.

Lottery Director Alan Larrick said they approved the rules yesterday in order to give casinos plenty of time to get up and running before the busy season:

“We’re trying to do everything we can to get sports betting available by football season – that’s what our goal is. We don’t know if we’re going to make it or not, but we’re going to try.”

Now, it’s a matter of WV casinos getting everything in place to comply with the regulations, set up their own sports betting operations, train staff and then go live. The regulations that were approved yesterday allow casinos to apply for an interim sports betting license (both real-world and online) at a cost of $100,000.

Casinos may also apply for permits to commence sports betting in a temporary area while actual sportsbooks are constructed. There are five casinos that could potentially be licensed to offer sports betting in WV:

• Wheeling Island Hotel Casino Racetrack in Wheeling
• Mountaineer Casino Racetrack & Resort in New Cumberland
• Hollywood Casino at Charles Town Races in Charles Town
• Mardi Gras Casino in Cross Lanes
• Casino Club at the Greenbrier in White Sulphur Springs

A significant portion of the West Virginia sports betting regulations approved deal with security, information-keeping requirements, and giving the Lottery Commission access to data. Some of the most noteworthy regulations include:

• Licensed WV Casinos are allowed to take wagers in-person, online and via approved kiosks
• Wagers may only be accepted from customers “that have been affirmatively located as being physically present” in WV at the time the wager is placed
• WV sportsbooks are to report suspicious betting activity “to the integrity monitoring system procedures approved by the Lottery”
• Licensed WV casinos may operate sports betting kiosks in locations approved by the Lottery Director
• Each casino may operate up to three “individually branded online sports” betting websites
• WV sports betting sites must verify the identity of all customers via last four of their social. Passports and taxpayer-identification numbers are also acceptable for identity verification
• Sports betting operators must maintain separate bank accounts for safekeeping of player funds
• Online sportsbooks must use geolocation technology to ensure access is only granted to people physically present in West Virginia

Online Sports Betting in West Virginia

West Virginia is now on the fast track to becoming the next state with legal online sports betting. Yesterday’s regulations state that each WV casino may operate up to three individually-branded betting websites, commonly known as “skins.”

This is a similar approach to that of the New Jersey online gaming market. In New Jersey, each casino may operate multiple skins that all look and feel unique. Casinos will also presumably be able to partner with different technology providers for each skin. This should encourage competition even among skins licensed under the same casino.

With five casinos potentially eligible to operate up to three skins each, that means players may eventually have up to 15 online sportsbooks in West Virginia to choose from.

The regulations state all players must be located in West Virginia at the time of placing wagers, but do not state customers must be residents. This seems to indicate anyone 21 or older may be eligible to bet on sports in West Virginia as long as bets are placed while inside state lines.

Still No Integrity Fee

West Virginia passed legislation earlier this year legalizing sports betting. There was a bit of a debate regarding whether or not an integrity fee would be included in West Virginia sports betting regulations, but the bill that was passed made no mention of integrity fees. The NBA and MLB were not happy with the bill as they insisted on sports betting operators being forced to pay the sports leagues an ongoing fee equal to 1% of all sports wagers placed.

Governor Jim Justice, however, put up a brief fight on that point. He even issued a statement at one point stating he had struck a deal with the Lottery Commission, casino operators and sports leagues that an integrity fee would be paid by the casinos to the sports leagues.

Casino operators flat out denied that any such agreement had been reached. Lottery Director Alan Larrick said they did discuss a potential compromise to give the sports leagues a 0.25% integrity fee rather than the full one percent.

Lawmakers and casino operators pushed back hard against the idea, and nothing more has been heard of an integrity fee since. Neither the original sports betting legislation nor the regulations approved yesterday include any text related to integrity fees.

That makes West Virginia just one more state in which the sports leagues have failed to get their desired integrity fee. Rhode Island sports betting legislation specifically forbids any sort of integrity fee. Neither New Jersey nor Delaware have an integrity fee.

Lawmakers and stakeholders in most states have staunchly opposed the idea of an integrity fee despite the leagues’ insistence that they need to the money to protect the integrity of their competitions.

The sports leagues may have shot themselves in the foot with this one by first opposing sports betting tooth-and-nail for years, and then by demanding such a massive fee. One percent of total handle works out to something in the range of 20% of net revenue for sportsbooks.

It also hasn’t helped that the leagues’ arguments in favor of an integrity fee haven’t been too convincing. For one, the leagues have been dealing with sports betting for decades. People have been betting on professional American sports in other regulated markets such as the UK as well as here at home via underground bookies and offshore betting websites. Bringing the USA sports betting industry out of the shadows should actually make the leagues’ job easier, not harder.

At other times, the leagues have argued that an integrity fee is due to them for hosting the very competitions that allow sportsbooks to earn money. The flop-flopping arguments and size of the fee have led more than a few people to call it a money grab.

The leagues may still get their integrity fee in some states, but so far it is not looking like very many states are buying what the leagues are selling.