United States

Sports Betting Across America: A 2019 Legislative Preview

As 2019 begins, states across the country are looking at their legislative agendas. Every state’s legislature will meet in 2019 and there will be several issues that will be discussed,some of which will revolve around gaming and lottery. One thing that will likely be discussed in every state is the potential for sports betting. This is an important opportunity for state lotteries to expand their portfolio of games and connect with the next generation of players.

Many states are assessing the expansion opportunities for the lottery. This may include the use of video lottery terminals, iLottery, or other forms to sell their existing products through the internet, kiosks, or other means. The potential for sports betting to enhance funding for good causes is another option that many Lottery Directors across the country are hoping their state legislators are considering. Commercial casino and online gaming operators also recognize the economic potential of sports betting, and are lobbying state legislators to implement a license-and-regulate model that would enable them to offer sports betting.

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Research Brief: Reversal of the 2011 Wire Act Memo

Late in the afternoon of January 14, 2019, the U.S. Department of Justice (“DOJ”) issued a new
memo reversing its stance on the Interstate Wire Act of 1961 (“Wire Act”). This 23-page memo
issued by the DOJ’s Office of the Legal Counsel (“OLC”) dated November 2, 2018, stressed that
all forms of gaming apply to the Wire Act. It reversed an earlier DOJ memo issued in 2011 that
stated that the Wire Act only applied to sports betting.

The action, which at best can be described as reversing a reversal, raises several concerns for the
gaming industry, especially for online gaming that occurs in the states of Nevada, New Jersey,
and Delaware, with active startups underway in Pennsylvania. The decision also may have
serious implications for mobile gaming, sports betting, daily fantasy sports (“DFS”), lottery, and
potentially even internet/social media marketing programs. Global Market Advisors (“GMA”)
had predicted for some time that the reversal of the 2011 Memo would occur during the Trump
Administration through the efforts of the Committee to Stop Internet Gaming (“CSIG”).

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New York State of Mind: What happened to the state’s casinos?

For decades, casino operators viewed the potential for casinos in the Catskills region of New York as the mother lode of gaming development.

The region’s proximity to the New York City metropolitan area and its history as a vacation destination made it a near ideal location for casino development. State legislators also saw casinos in upstate New York, a region that has had difficulty recovering from the loss of a host of manufacturing industries, not only as a tool for economic development, but tax revenue.

In 2013, the New York state legislature passed the Upstate New York Economic Development Act, which provided the legal framework for commercial casinos in the state. The act went into effect on January 1, 2014. When signing the bill, Governor Andrew Cuomo stated, “This new law will bring the state one step closer to establishing world-class destination gaming resorts that will attract tourists to upstate New York and support thousands of good-paying jobs as well as new revenue for local businesses. For too many years, gaming revenue has left New York for our neighboring states.”

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Research Brief: U.S. House Hearing on Sports Betting

Today, The United States House of Representatives Judiciary Committee held a hearing entitled “Post-PASPA: An Examination of Sports Betting in America.” The subcommittee on Crime, Terrorism, Homeland Security, and Investigations, chaired by Representative Jim Sensenbrenner (WI-5), heard testimony from five stakeholders related to sports betting. This included, in the
order presented:

• Jocelyn Moore, Executive Vice President, Communication and Public Affairs with the
National Football League
• John Warren Kindt, Professor with the University of Illinois
• Sara Slane, Senior Vice President of Public Affairs with the American Gaming Association
• Jon Bruning, Former Nebraska Attorney General and Counselor to the Coalition to Stop
Online Gambling
• Becky Harris, Chairwoman of the Nevada Gaming Control Board

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An Introduction to Sports Betting Operations

With the repeal of the Professional and Amateur Sports Protection Act (PASPA), Indian casinos, commercial casinos, state governments, lotteries, and racetracks are all examining the feasibility of offering sports betting in their jurisdictions and creating legislative paths to bring sports betting to fruition. Sports leagues are also taking an active role, lobbying state legislators and even trying to get Congress to pass legislation that would federally mandate that they receive a cut of total wagering handle.

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If PASPA is Repealed, Then What?

Much has been written about the Professional and Amateur Sports Protection Act (PASPA) and its possible repeal. To summarize, there are three possible outcomes. The first is that the Supreme Court of the United States (SCOTUS) rules PASPA is unconstitutional. In that case, it will be up to individual states to decide whether to allow sports betting and the various forms it might take. The second scenario is that SCOTUS lets PASPA stand in its current form. In this scenario it would be up to Congress to decide if it wants to repeal or amend PASPA. Given the current political climate in Washington D.C., passage of such a bill might take some time. The third scenario is that SCOTUS takes a completely different route, either issuing a partial repeal or
potentially invalidating the four state exemption that currently exists.

Should the Supreme Court rule in New Jersey’s favor, one can expect sports betting to be available in a number of jurisdictions in fairly short order. Five states, outside of the four that
already had legislation in place prior to the passage of PASPA in 1992, have already passed legislation authorizing sports betting, and approximately fifteen others are considering enabling legislation or studying the issue. The question now becomes, should PASPA be repealed, what are the challenges that America’s tribes face in creating sports betting products that are competitive with what various states with commercial casinos and lotteries will ultimately offer.

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Research Brief: SCOTUS Repeal of PASPA

Earlier today, the U.S. Supreme Court issued a ruling on the constitutionality of the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) in the Murphy v. NCAA case overturning the law and allowing sports betting to move forward in the United States. In a 7-2 decision, the Supreme Court also provided a victory for states’ rights. Today’s ruling allows commercial entities in states and Native American tribes to move forward to conduct sports wagering.

The Murphy v. NCAA case was heard by the Court in December. At the time, Global Market Advisors (GMA) had predicted that the court would rule in favor of states’ rights and sports betting on a 6 – 3 vote supporting New Jersey’s argument. The opinion of the Court issued today was led by Justice Samuel Alito and supported by Chief Justice John Roberts and Justices Stephen Breyer, Neil Gorsuch, Elena Kagan, and Anthony Kennedy. Justice Clarence Thomas wrote a concurring opinion. The dissenting opinion was issued by Justices Ruth Bader Ginsburg and Sonia Sotomayor. Justice Breyer joined the dissenting opinion on a small portion of the overall opinion from the court.

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Research Brief: The Economics of Sports Betting

As the United States awaits a decision by the U.S. Supreme Court on the Professional and Amateur Sports Protection Act of 1992 (“PASPA”) in the Murphy v. NCAA case, stakeholders are busy evaluating the size of the sports betting market opportunity and contemplating how to take advantage of the opportunity. Several government stakeholders have already enacted legislation
regarding the potential for sports betting, including the most recent legislation passed in Pennsylvania (2017) and West Virginia (2018). Many other state governments have introduced
proposed legislation for the new potential market opportunity, including Iowa, Illinois, Michigan, New York, and Connecticut.

These enacted and proposed legislative pieces have begun to shape the potential regulatory framework of a legalized sports betting market in each state, including setting tax rates and
licensing fees. Other stakeholders, including the professional sports leagues, have suggested that an integrity (royalty) fee should be levied as well. Unfortunately, some of these proposed taxes and levies do not fit within the economic construct of the sports betting opportunity as the margins achieved in the industry are too slim for the operator to generate enough profit to justify investment.

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Deep Dive: The Future of Sports Betting in the United States

As the nation awaits the upcoming decision by the Supreme Court of the United States (SCOTUS) in Christie v. NCAA, various stakeholders are evaluating their next steps, and how to maximize the revenue potential from legalized sports betting.

Today, a federal law known as the Professional and Amateur Sports Protection Act (PASPA) limits most legal sports betting to Nevada and three other states. This article examines the critical success factors for sports wagering in the United States and the operators that will be best positioned to provide the products and services that sports wagering customers will seek.

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Research Brief: U.S. Supreme Court Sports Betting Update

Today, the Supreme Court of the United States (SCOTUS) heard the Christie v. NCAA case. SCOTUS listened to arguments from former Solicitor General Theodore Olson, representing Governor Christie and the State of New Jersey. The NCAA case was led by former Solicitor General Paul Clement, who defended that the Professional and Amateur Sports Protection Act (PASPA) should remain the law by upholding the Third Circuit Court of Appeals previous decision.

Based on the arguments, Global Market Advisors (GMA) believes that if a vote were held today, SCOTUS would vote 6-3 in favor of New Jersey, thereby repealing PASPA and overruling the lower court decision. The majority opinion would include Chief Justice Roberts and Justices Alito, Breyer, Gorsuch, and Kennedy. Those five, in addition to Justice Thomas, who seldom asks questions within the court, but tends to side with the more conservative judges, appeared skeptical of the argument presented by the NCAA.

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