View From The Eighth Pole: Who Wins From Sports Betting?

by | 05.15.2018 | 8:43am
Monmouth Park's William Hill Sports Book

We woke up in a different world today.

Yesterday, outside of the state of Nevada, the only legal “sports” betting in the United States was on horse racing. Today, or more realistically in the coming months and years, Americans will be able to bet on baseball, basketball, football and hockey, among other sports. They'll be able to bet on the next pitch, the next touchdown.

And this helps racing how exactly?

There will be winners, for sure, as a result of the Supreme Court decision that struck down the federal law prohibiting states from enacting sports betting legislation.

The most immediate winner is Monmouth Park and its affiliated entities, including Darby Development, which manages the track under the leadership of Dennis Drazen and in association with the New Jersey Thoroughbred Horsemen's Association. I don't know the details, but Drazen said revenue from sports betting at the Oceanport, N.J., racetrack's William Hill Sports Book will support purses.

Monmouth Park and New Jersey state officials led the fight to overturn the federal prohibition on sports betting and are set to start taking bets in the coming weeks, having passed enabling legislation in the state capital.

Outside of New Jersey, the picture is not so clear.

Champagne corks undoubtedly were popping at companies that operate advance deposit wagering companies that are well positioned to handle the online component of sports betting in states where it will be made legal.

Kip Levin, CEO in the U.S. of TVG, the racing network and ADW company owned by betting giant Paddy Power Betfair, said: “Today's ruling is a watershed moment for U.S. sports fans, one we've been preparing for, and we look forward to working with states and our partners to ensure a safe, secure environment for legalized sports betting.”

Churchill Downs Inc., which recently purchased Presque Isle Downs in Pennsylvania after state lawmakers there passed legislation permitting online gaming and sports betting, stands to compete well with its TwinSpires ADW brand. Investors sent CDI's stock soaring 5 percent in the hours after the Supreme Court ruling was announced.

A word of caution: Pennsylvania racetracks that currently have slots licenses will have to pay $10 million for a sports betting license and will be taxed at 36 percent of revenue under the current law. It's up to the state Gaming Control Board to draft regulations before Pennsylvania sports betting can begin. There is no revenue agreement for purses from sports betting at Pennsylvania racetracks.

Horsemen in states outside of New Jersey asking for “their share” of revenue from this new form of wagering have no reason to be optimistic. They can only hope a floodgate of future gamblers at racetrack sports books or expected to sign up with TVG or TwinSpires or one of the other ADW companies will cross over to bet on horses. That didn't work with slot machines, but there are far more similarities between sports bettors and horseplayers than there are with casino gamblers or slots players.

Speaking of groups wanting in on the action, let's not forget about the sports leagues – the NFL, NBA, MLB, NHL and maybe even the NCAA.

Professional and amateur sports have been opposed to any expansion of sports betting since New Jersey started this fight in 2012, and they've never wanted revenue from Nevada sports books. Now that the federal prohibition on sports gambling has been struck down, they are changing their tune. Leagues and players unions want what they consider to be their fair share for supplying the product on which bets will be made.

Sound familiar?

Racetracks and ADW operations in the U.S. are governed by the Interstate Horseracing Act of 1978, which gives horsemen who put on the show veto power over simulcasting agreements.

There is no such law governing sports betting, but the NFL is already seeking help from Congress to set up a federal regulatory structure that would apply to all states. Otherwise, sports betting will be regulated on a state-by-state basis, with different rules in different states and varying degrees of emphasis on integrity – which the leagues say is paramount.

In other words, the NFL (and presumably some of the other major league sports) does not want sports betting to be regulated like horse racing currently is.

Short of federal legislation, it would not be surprising to see the leagues – or even unions that represent players – file lawsuits claiming that their intellectual property rights are being exploited without compensation. That kind of action could be mitigated by aggressive marketing agreements or ownership deals, the type we saw between the leagues and fantasy sport giants DraftKings and FanDuel a couple of years ago. Look for the term “integrity fees” to be prominent.

Some states will move quickly to pass laws permitting sports gambling, but it will not be easy in others. In California, for example, Native American tribes have enormous political clout in the state capital, and a state-wide referendum would have to pass before sports betting can be legal. In Florida this November, where lawmakers have stalled further expansion of gambling in recent years, there will be a state-wide referendum that will block any additional gambling through legislative approval alone. If that referendum passes, it will take state-wide approval of voters. In New York, there are many competing interests in the gambling marketplace, complicating efforts by the New York Racing Association to be a major player.

“Nobody knows anything,” William Goldman once wrote about the movie business. I think the same can be said about the coming wave of sports betting. The only sure bet is that things have changed as a result of yesterday's Supreme Court decision.

That's my view from the eighth pole.

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