The Good Life

All Bets Are On

Now that sports betting is legal outside of Nevada, some states are starting to cash in
By Michael Kaplan | From Matthew McConaughey, July/August 2018
All Bets Are On

This fall promises to be a sweet season for football fans in New Jersey and Delaware. Rather than watching games in crowded sports bars or on their sofas, devotees in those states will cut out to racetracks and/or casinos where they’ll catch the gridiron action on enormous state-of-the-art screens, with food and drink and comfy seats at the ready. Most critically, though, they’ll be able to legally bet on the matchups that unfold in front of them. 

That is thanks to the recent Supreme Court decision to shut down the longstanding ban on sports betting outside of licensed operations in Nevada. As per the court, states (rather than the federal government) will be left to decide on whether or not their citizens can bet on sports. Long before the gavel slammed down, though, legislators from New Jersey (who were fighting for the change) and Delaware (where parlay betting became legal in 2009) had already decided. “When the decision came, for the first time in my political career, I was at a loss for words,” says former New Jersey State Senator Ray Lesniak, the man who introduced the bill some six years ago. Proudly, he adds, “We lost eight times before overturning a nationwide ban with formidable opponents such as the NFL and the NBA.”

Delaware took its first legal sports bet on June 5, and New Jersey will most assuredly be close behind. But they will definitely not be alone for long. Right now, there are 40 states where casino gambling is legal in some form, and many of them are already looking to get in on the sports-betting action. “Eighteen states have considered legislation [to have sports betting],” says Casey Clark, vice president of strategic communications at the American Gaming Association, which represents the U.S. casino industry. “Whoever is out of the gate quickest will have the best opportunities to profit.” That is because they will enjoy windows of time with no competition from neighboring states. Unfortunately for New Jersey and Delaware, the first states poised to be out, they happen to border one another.

In addition to Delaware and New Jersey (which may also be up and running by the time you read this), Pennsylvania, New York, Mississippi and West Virginia all have at least the preliminary approvals to begin offering sports betting. “Mississippi is ready to go,” says Clark, “but they are not set to offer mobile betting. I think opportunities are left on the table by doing it that way. I can see New York passing something this year, but I think it’ll take a while to get up and running.” West Virginia lawmakers approved mobile and brick-and-mortar sports betting, though negotiations between the casinos and the state government are ongoing.

Most puzzling of all the contenders is Pennsylvania. Sports betting has been approved but its current terms may not be tenable for casino operators. “The  state wants a 36 percent tax rate from the casinos [while other jurisdictions that have gotten far enough to figure out tax policies are in the 10- to 20-percent range],” says Clark. “In order for a licensed operator to offer sports betting under those circumstances, they will have to lower the odds. Nobody will leave illegal sites like Bovada to get a worse deal from a legal sports book.” Apps for illegal, offshore sites are already on many people’s phones. “If, say, Bovada offers 10 to 1 on a bet and the casino in Pennsylvania offers 6 to 1, you will go with Bovada,” Clark adds.

The longer the state of Pennsylvania and its casinos waste time and dicker around over tax rates, the longer New Jersey racetracks and casinos will lure the state’s substantial pool of players and generate much needed revenue. “New Jersey should get a lot of credit,” says Clark. “They brought the case to the Supreme Court, they pursued it and they should benefit by being on the front end of things.”

According to the American Gaming Association, sports betting is a $150 billion industry in this country.  Considering that most of the betting is done illegally, it’s irrational that for more than 25 years most states outside of Nevada could not license or authorize wagering on sports. Hence, for as long as most of us can remember, the opportunity to watch a day’s worth of games and bet on them lawfully has accounted for much of  Vegas’s draw, especially during football and basketball seasons. 

Why did it require a six-year uphill struggle to convince federal lawmakers that New Jersey (and, as part of the package, every other state in the union) has a right to decide whether or not it should allow people to bet sports in its casinos? “People ask me and I tell them that I really have no clue,” says Chris Andrews, sports book director at South Point Hotel, Casino and Spa in Las Vegas and author of the forthcoming Then One Day, his book of recollections from the sports-betting world. “For some reason, America has a puritanical streak running through it. You can buy guns at the corner store but you can’t bet on a game.”

The unreasonably uptight view of sports betting has a long and dirty history. Prior to the 1919 White Sox games-fixing scandal—a group of gamblers, including the notorious Arnold Rothstein, bribed players to blow the World Series that year—betting on sports loomed in a gray area where it was not illegal nor was it exactly legal. Fallout from the ham-handed rigging, which allowed Rothstein alone to win $250,000 by betting against a team that would get dubbed the Black Sox, encouraged lawmakers across the nation to make betting on sports illegal.

The goal was to declaw cheaters and to keep sporting events clean. But of course that did not work. Just think of point-shaving scandals over the years and the high-profile gambling of Pete Rose. Says casino bookie Andrews, “If things are hidden under the basket, you open up opportunities for corruption. We want a fair game and the proper odds. Legal bookmakers earn money when the games are played fairly. Plus we serve as watchdogs and file reports when betting activity looks suspicious.”

In 1949, the state of Nevada was not unlike today’s Atlantic City, where casinos have long been struggling to remain solvent. Three years after the opening of Bugsy Siegel’s Flamingo, which stands as Sin City’s first modern gambling emporium, tourism was flagging. In a bid to attract interest, state legislators decided to imbue the Nevada casinos with the then-novel offering of legal sports betting. The idea: Game-loving gamblers would flock there to lay down money on their favorite teams.

But there was a problem. In 1951, the federal government, possibly piqued by Nevada green-lighting sports betting, levied a 10 percent tax on revenue from the books. On top of state taxes and various operating expenses, there was a lot to overcome (not unlike with the proposed situation in Pennsylvania). In short order, sports betting became a fringe business for casinos. 

At the same time, illegal sports betting, often benefiting organized crime, boomed. Those entities were not subjected to the 10 percent tax, and criminals found the taking of bets to be fabulously profitable. People like to wager on sports and they have shown it through their willingness to deal with criminals. “It’s supply and demand,” says Andrews. “If there is demand for a product, be it guns or drugs or gambling, people will be out there to satisfy the demand.”

In a bid to curb the illicit betting on sports, Robert F. Kennedy spearheaded the Federal Wire Act of 1961. This made bookmaking outside of Nevada federally illegal in the United States and introduced jail sentences for those convicted of doing it. Of course, the law failed to deter illegal bookmakers from taking wagers or the public from making them. 

By 1976, the U.S. government acknowledged as much. A report called “Commission on the Review of the National Policy Toward Gambling” bluntly stated that “gambling is inevitable.” It pretty much conceded what most people already knew: Americans will gamble whether it is legal or not. That same year, the federal government cut its Vegas sports-book tax-take from 10 percent to 2 percent. Not coincidentally, 1976 was the year when major casinos found it juicy to have sports books and that facet of the industry soared. It has yet to come down. Last year, Nevada’s books earned a record-setting $248.7 million. The state, which taxes at a rate of 6.75 percent, collected millions in sports-betting revenue—alongside a federal tax that has since been reduced to one-quarter of one percent.  

Surely, the success in Las Vegas has not been hurt by federal government decisions to clamp down on other states pursuing sports-betting opportunities. In 1992, the Professional and Amateur Sports Protection Act (PASPA) prohibited any states from introducing legal sports betting. This is the ruling that New Jersey successfully rallied to overthrow.

Lesniak fought since 2012 to legalize sports betting in the Garden State. The battle turned into a six-year slog, often written off as his Waterloo. “Nobody gave me a snowball’s chance in Hell,” he crowed soon after PASPA was tossed. “I was criticized for throwing nothing more than a Hail Mary pass and today I completed it.”

Now that sports betting in Lesniak’s home state is revving up, what will it ultimately look like? As of this writing, Monmouth Racetrack, in Oceanport, New Jersey, is the most ready to start taking bets and the expectation is that it will do so ahead of other Garden State operations. “There already is the $3 million William Hill Sports Bar on our property,” says Dennis Drazin, CEO of Darby Development, which operates the track, explaining that the venerable London-based bookmaker whom the bar is named for will be working with Monmouth on its sports betting enterprise. “They’re putting another $5 million into building out a Vegas-style sports book.”

That is pretty much the bottom-line: Sports betting across the country, at tracks and in casinos (plus, who knows, maybe even in bars), will look an awful lot like doing it in Nevada. “The Nevada model works,” says Andrews. “Gaming people I’ve spoken with believe that we have a good system in place.”

Things are helped of course by the fact that longstanding Vegas casino companies such as Boyd Gaming, Caesars Entertainment and MGM Resorts International have outposts all over the United States. For independent operations, the Hills of the world appear to be likely collaborators. “Most racetracks will partner with somebody from the outside,” says Drazin. “If somebody comes in with a $100,000 bet, you need the expertise to know whether to take it or not.” 

The most obvious winners in all of this will be the casinos and racetracks that get chances to participate in sports betting early. States that are friendly to this pursuit will benefit as well. In New Jersey, for example, taxes on sports books are expected to be 9.75 percent for profits on in-person betting, 13 percent for money bet remotely. As of this writing, the professional sports leagues are also rallying for a piece of the action, known as an “integrity fee.” Vegas has thus far succeeded in not paying it. In West Virginia, the government agreed to the fee, but casinos are balking. Other states may have their work cut out for them. Lesniak does not want New Jersey to share its money. “We’re not paying them tribute,” he says.

When it comes to being lucky winners, it’s tough to beat the  just-opened Hard Rock Hotel & Casino and Ocean Resort, Atlantic City’s new spots that seem well placed to benefit from the windfall of sports betting without having had to weather the devastatingly hard times that closed down five of Atlantic City’s gambling properties in recent years. Last fall, Borgata announced plans to build a $7 million Vegas-worthy sports book; reports have it that the casino is hoping to be taking bets ahead of its Atlantic City competitors. And if the cost of construction sounds high, it really isn’t. “Investments [to put up inviting sports books] are not significant,” Lesniak says. “You need wraparound TVs and technology. You are not building theme parks.”

The big losers are illegal bookies and offshore operators. Though they won’t be put out of business, they will certainly take a hit. And Vegas will lose some of its allure as people find it cheaper (and easier) to bet legally while staying closer to home. 

Lesniak, the man who made it all happen, seems confident that the United States will soon be a country that embraces legal sports betting. “Everybody except Utah will step up,” he predicts. “The NCAA said that they will not do tournaments out of New Jersey [if sports betting gets legalized there]. I say that soon the only state where they will be able to hold their tournaments will be Utah.” 

Michael Kaplan, a Cigar Aficionado contributing editor, writes frequently on gambling. 

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