ESPN: What Legalized Sports Betting in USA Means for Offshore Books

Written by:
C Costigan
Published on:

ESPN featured a story Monday on the fate of offshore sportsbooks now that individual states have begun allowing sports wagering. 

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Offshore bookmakers say that taxes and lack of anonymity in addition to the ability to offer unique wagering options, lines and competitive bonus deals will allow them to stay competitive.

ESPN.com offered this analysis of the current state of sports betting in the U.S.

The offshore market is large and deeply ingrained -- so much so that offshore lines are routinely referenced in mainstream publications and on television, drawn in by either the familiarity of the name or the deceiving ".lv" domain name attached to the website. When U.S. sports bettors search Google for "best online sportsbooks," they find a menu of options to wager offshore -- and wager they do. Some bettors make trips to Las Vegas for March Madness or before the football season to place bets, while others send funds to friends or associates based in Vegas (which itself falls into a legally gray area) to "get down" in a more accessible way.

Those offshore books have been the only options for U.S. bettors over the past quarter century; engaging with them has become habit. It seems as though times are changing, as these offshore books are now faced with competition from well-financed companies running new and legal sports-betting operations in the United States, along with other legal sportsbooks on the way as more states pass legislation.

The offshore and local bookies aren't going to fold and go quietly into the night, though. Some of their company executives believe that business from U.S.-based patrons will actually increase. But that doesn't change the fact that times are certainly changing. Quickly.

"As sports betting has become less and less taboo, offshore sportsbooks have seen their player bases steadily grow over the last decade," said one executive at a major offshore sportsbook who wished to remain anonymous. "The repeal of PASPA will drive more curiosity towards sports wagering, and even if new players start out betting sports at the local horse track, we expect to eventually find them betting online and offshore."

Scott Cooley, spokesperson for the offshore sportsbook and long time Gambling911.com endorsed BetDSI, agreed with that assessment.

"We expect [an] influx of new customers based on an eagerness to begin betting right away," he said. "The government has basically said it is legal to gamble on sports now, and if your state isn't equipped to take wagers yet, a respected and long-tenured sportsbook such as ours will [be] available anywhere you are. In the next year, we project to gain 15 to 20 percent of our current clientele base."

Gambling911.com Marketing Director Payton O'Brien compares the current status of sports betting in the United States to that of the online horse racing sector.

"Half the states allow horse betting online, half do not," she said.  "Advertising for sites like TwinSpires are broadcast nationally.  As a result more people than ever place bets with offshore books during the Kentucky Derby, including those from states where U.S.-based sites are able to operate.  Those who have access to TwinSpires and similar sites still prefer the anonymity offshore books offer."

Anonymity and taxation tend to go side by side.

From ESPN.com:

The pie-slicing of revenue generated by legal sports betting begins with state taxes. As states construct legislation to generate as much tax revenue as possible, a big question looms: Where's the sweet spot for giving the state a meaningful cut, while allowing sportsbook operators the ability to make a profit, attract new customers and retain them?

New Jersey levies a reasonable 8.5 percent tax on in-person wagers and 13 percent for online wagers. West Virginia applies a 10 percent tax across the board. Rhode Island is set to keep a whopping 51 percent of net revenue for the state in a profit-sharing arrangement. Other states are considering anywhere from 7.66 percent in Iowa to 36 percent in Pennsylvania. For context, Nevada operators pay 6.75 percent to the state and 0.25 percent off the top to the federal government (a federal excise tax, which every state implementing legal sports betting frameworks will also have to send Uncle Sam).

"It's not going to be a great advantage to go into a market where you're going to be potentially taxed out of it," Jennifer Roberts, associate director of the International Center for Gaming Regulation, a gaming lawyer and adjunct professor at the University of Nevada Las Vegas, told ESPN. "What you might see is less-experienced operators trying to come in that are willing to take that risk. I think that having high tax rates and high license fees can disincentivize reputable, solid operators from coming into the market."

Controversial intregrity fees, favored by the professional sports leagues, could also be forced upon the players.

The ESPN.com article does suggest that offshore books are lacking when it comes to dispute resolution.  This is not necessarily true.  Many of today's offshore books, including BetDSI, have now been serving the U.S. betting public for 20 plus years with only a handful of complaints documented.  Many of these complaints have to do with reducing limiits.  Since sportsbooks began operating in the state of New Jersey, a number of professional sports bettors found themselves banned within the first two weeks.  Another book initially refused to pay out a winning bet after its in-play wagereing program went haywire and published the wrong lines.  

Even the European bookmakers regularly come under fire for their questionable practices, everything from booting players without recourse and misleading advertisements.  The European market has long been regulated.  Last week it was revealed that Bet365 founder Denise Coates paid herself an 'obscene' £265m in 2017.  Players were quick to chime in that they and others were quickly booted from that book for "winning too much".  The implication here is that Coates paid herself so much money because the book is filled with losers.  One well known player revealed via Facebook that he was aware of over a dozen players that had been kicked out of Bet365.  Indeed it is rare for offshore books to ban players.

- Chris Costigan, Gambling911.com Publisher

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