The Missing Millions: States Await Gambling Windfall From Sports Betting
ProPublica Illinois has an excellent piece on the expected windfall tied to newly allowed gambling activity and why it might be a long wait.
START YOUR OWN SPORTSBOOK - 6 MONTH FREE TRIAL
First off, sports betting.
It's been almost a year since the U.S. Supreme Court ruled to overturn decades long prohibition against sports betting.
Since that time a handful of states have amended their laws to allow the activity. New Mexico Tribal casino operators simply opened sportsbooks without any change to that state's law.
To date, New Jersey (which filed the original case with the high court), Mississippi, West Virginia, Delaware, Pennsylvania, Rhode Island and the aforementioned New Mexico have embraced sports betting with mixed results.
New Jersey arguably has enjoyed the most success, both at physical casinos, race tracks and a sporting complex, and online. There is a limit to that success, however, as the state has enforced a strong arm policy of forcing ad partners and affiliates to apply for license and pay a steep fee of $5000 renewable. Worse, the state has demanded these affiliates abandon years long relationship with offshore sportsbooks. A dozen sportsbooks competing with one another with few if any ad venues available is a recipe for disaster. Draftkings and FanDuel will have a leg up over the competition, but even they will find it tough to stay afloat.
Current regulations make it near impossible for these companies to reach their key target market, those in other states and countries who look to visit New Jersey in the near future. Close to 45 million people travel through Newark's Liberty Airport each year. That's nearly six times the population of New Jersey itself. Wildwood, a coastal city in what we Northerners refer to as South Jersey, is among the top summer destinations for Canadians.
Some, with the exception of those who paid the couple thousand dollars for a "vendor" license, believe the state went a bit too far cracking down on Gibraltar-based Oddsshark, the preeminent odds provider. The few NJ-licensed affiliates, not surprisingly, applauded the state's efforts and quickly claimed New Jersey itself blocked Oddsshark. Not so, Oddsshark simply didn't feel like dealing with the nonsense. Instead of fighting with the state, Oddsshark simply opted itself to block NJ residents from visiting their site. That has set a dangerous precedent. It's bad enough New Jersey residents have to pay ridiculous property taxes and high auto insurance. Now they are being deprived of visiting some of their favorite websites. Make no mistake about it, Oddsshark is a behemoth in the world of sports betting odds monitoring.
Of course, Gambling911.com, through its parent company, has fought hard to ensure online news sites like - well ProPublica, Breitbart, Huffington Post, the Daily Beast, etc.. - gain the same type of access afforded to big name news outlets. We won a landmark court decision on this front years ago ensuring online media outlets are not discriminated against. Still, affiliates need to understand that revenue share deals are akin to business partnerships, whereby they receive upwards of 40 percent of the profits (losses of those players sent). As such, New Jersey may be within its rights to scrutinize such relationships. Gambling911.com will never, and has never, engaged in this type of partnership arrangement. It is not immediately known what if any type of ad deals Oddsshark entered into with NJ online sports betting operations.
The state also prohibits betting on its college teams. While NJ might not be in the same league as say an Alabama, North Carolina, Kansas, Florida, Kentucky or Indiana when it comes to college sports, Seton Hall is once again a successful program that made its way into the 2019 NCAA Men's College Basketball Tournament. Mississippi prohibiting betting on college football at its sportsbooks would be akin to suicide.
It's not all bad news for the Garden State. The industry will attract hundreds of entrepreneurs and high spending executives to a much ballyhooed sports betting conference the end of this month - Betting on Sports America. Gambling911.com is a media partner.
From July through February, the state was bringing in about $1.8 million per month in taxes on sportsbooks. Mobile sports betting has fueled the momentum.
But this appears to be the one bright spot.
In West Virginia, the problem has been subpar management and a website that has already seemingly dissolved. Mississippi sportsbooks were in high demand throughout the south when they first debuted, as we here at Gambling911.com can attest to. In fact, there was a point early in the season where Memphis ranked among the top ten referring cities to the G911 site with numerous search inquiries for the various Mississippi sportsbooks, especially those in Tunica. Those search queries have subsided to a degree.
Rhode Island and Delaware offer limited service sportsbooks and betting opportunities (Rhode Island does not permit parlays). Pennsylvania books will have a tough time competing with their neighbors and the offshores as exorbitant taxes will force sportsbooks there to pass these costs onto gamblers in the form of bad lines, limited betting options and limited service. Win on a regular basis with a PA book, you're likely to be toast.
Now for the numbers, a la ProPublica:
In Delaware, tax revenues from sports betting plummeted from $1.4 million in January to a paltry $22,000 in February.
“Rhode Island, the only place in New England with legal sports betting, had expected to generate more than $1 million a month for its state budget through its 51% tax on sportsbook proceeds. The actual revenue? About $50,000 a month ...”
“West Virginia is taking in just a quarter of the monthly tax revenue it had projected.”
In Mississippi and Pennsylvania, tax revenue is half the projections.
The solution is an easy one, according to ProPublica Illinois.
In some ways, it’s similar to what happened during the first full year of video gambling in Illinois, when revenues lagged far behind projections.
Through 2017, video gambling brought in $1.3 billion less than predicted by legislators, based on a ProPublica Illinois analysis. The state legalized video gambling in 2009, and the rollout lagged until the first machines appeared outside of casinos in 2012.
New Jersey's success has been with mobile. Limiting to just casinos, race tracks and the very difficult to park Meadowlands complex just won't cut it. The state does need to rethink its current strategy. Established online gambling affiliates are experts at delivering results. They won't touch the New Jersey market in its current state (pun sort of intended). Instead, they will wait to pounce on a state (maybe Illinois) that is a little bit more hospitable. For example, Caesars can easily overtake Draftkings and FanDuel in the New Jersey market with a tried and true affiliate partner in their corner should New Jersey come to its senses. We are confident that they will, though it may take some time.
States that partner with successful long established offshore operators and stop treating them like piranhas will realize the greatest success. Might sound crazy. This will never happen, right? Last we checked, New Jersey has partnered with PokerStars. They were named in a 2011 indicted filed by then new york attorney Preet Bharara. Nuff said.
- Chris Costigan, Gambling911.com
