Legislators have work to do (and it’s not sports betting)By Nick Sortal, CDC Gaming ReportsJanuary 9, 2018 at 8:41 pmI began my newspaper career in 1980 in the Midwest before settling in Fort Lauderdale in 1985. I specialized in human interest stories for about 20 years, until one day the managing editor called me into her office. “We have all these casinos opening,” she said. “And you’re our new gambling writer.”The Seminole Hard Rock Hotel & Casino had opened in Hollywood about three years earlier, but I had never set foot in it. Phrases such as “tribal sovereignty” and “win per machine” were gobbledygook to me. So I started from scratch.Legislators from across the country gathered in Miami last week for the winter meeting of the National Council of Legislators from Gaming States. The non-partisan, gaming-neutral group was created to get legislators up to speed. As I watched, I thought of how I entered the gambling universe.For those of us with connection to the business, the major topic of change, today, is sports gambling. (And if you forget that, the American Gaming Association will remind you.) But from a legislator’s point of view, their state will almost certainly be dealing with lots of other gambling-related issuess well before they get to the big new thing, sports betting.So with that as the background, here’s what I think legislators — who probably have a dozen other issues on their plate that are a higher priority than gambling — might have learned during the NCLGS meeting:Regulators, the industry, and legislators should work together. As state senator Bill Coley of Ohio, the secretary of NCLGS, stated: “We’re here because we want to formulate good policy. To those in the industry here, stop thinking we’re the enemy.”An addition of sports betting would also bring mobile and Internet gambling. Speakers pointed out that a large proportion of consumers today do almost everything on their phone. So if a state were to allow sports gambling – with the implied goal of adding tax revenue to the coffers – a large portion of customers would be excluded if mobile access was not rolled out. And, of course, mobile = Internet, so this opens the door to all kinds of machinations, including daily fantasy sports (which is, arguably, at its core, sports betting). And I think there is at least one other complication: as evidenced by a recent lawsuit by the Seminole Tribe of Florida, any addition of sports gambling could influence exclusivity, necessitating the renegotiation of Indian compacts.The lottery is still king. In my Florida, as an example, lottery revenues last year provided $1.6 billion for public education. (Gotta love that 50 percent hold on the terminal games.) DFS, sports betting, and Internet gambling would bring only a fraction of that, experts note. “The lottery is often the forgotten revenue generator,” said Daniel Russell, a former Florida Lottery general counsel now with Jones Walker. “We talk fantasy sports but every day people are spending hundreds of thousands, if not millions, on lottery tickets.”There isn’t much fear of the social ills of gambling. Many speakers had an almost gleeful tone in their voice as they talked about products or legislation that could “increase revenues.” But I think in the back of legislators’ minds is balancing more revenues versus the well-being of their constituents. For example, legislators also saw a presentation on the changes in the mindset of compulsive gamblers as casinos move closer to a cashless operation. Potential problems include a sense of disorientation because no actual money is exchanged, the ability to play continuously without taking a break to get more cash (and perhaps to have second thoughts), and fewer consumer protections.Even simple stuff is complex. For example, one panel focused on whether states should tax casinos on their free play. One line of thinking is that allowing free play to go untaxed is being overly generous to casinos. But when legislators asked to see the actual numbers, they got a better sense of the value of free play. Operators argued that for every dollar cycled through in free play, three additional dollars were then wagered – enough to more than cover the taxes lost on the original free play.Neighboring states can have a big effect. Ronnie Jones, chairman of the Louisiana Control Board, lamented the challenges facing his state, which was among the first to offer gambling, via its riverboat casinos. “Gaming revenue has surpassed oil and gas revenue. It’s a huge footprint in the state of Louisiana,” he said. “But if I had to design a roadmap on how to regulate gaming, it would not be Louisiana’s.” He notes that operators complain that Oklahoma tribes are now attracting customers from the Dallas market, who used to visit Louisiana. Meanwhile, Mississippi has improved its offerings, while Louisiana’s casinos are still stuck in the riverboat stage. “Our first generation was built in 1993 and they look like they were built in 1993,” Jones said.But what works in one state may not work in another. One of the success stories making the rounds at industry conferences is Internet gaming in New Jersey. Experts note that not only has iGaming drawn significant revenue, it has also whetted the appetite for the associated brick-and-mortar casinos, who have reported higher revenues. But Spectrum Gaming managing director Michael Pollock notes that such a relationship succeeds only if the casino tax rate is lower than what online has. “The land-based tax rate is 8 percent, the online rate is 15 percent. They have a direct incentive because that 7 percent delta goes right to the bottom line,” he notes. States with 35 percent slot taxes, take note.