Gaming analyst blasts taxes, politicians in briefing

January 7, 2022 6:53 PM
  • David McKee, CDC Gaming Reports
January 7, 2022 6:53 PM
  • David McKee, CDC Gaming Reports

On the day that Caesars Sportsbook and FanDuel were approved to go live with online sports betting (OSB) in New York state, Global Market Advisors analyst Brendan Bussmann took aim at Albany. “We have an exceptional and I would say intolerable tax rate [51 percent],” he fumed, citing the lack of deductions for free-play offerings and other impediments to profitability.

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Although New York will eventually host nine licensed OSB providers, then-Gov. Andrew Cuomo modeled his state’s regime on the monopolistic setup in New Hampshire, where sports betting is the sole province of the state lottery.

Bussmann was pessimistic about an Empire State rate reduction. “Name me one legislator who wants to reduce taxes on something and doesn’t enjoy revenue.” He added, “These high-tax states are not a good model for anybody. If you want the private sector involved, you’ve got to give them the runway to do it. … When you sit there and put tax rates over 50 percent, the only winners are the states. You don’t have a dynamic market. You don’t have a competitive market.”

Although sports betting is now legal in 37 states, Bussmann was cautious about its chances for expansion in 2022. One big prize, Texas, is off the table until 2023. Although public support is “overwhelming,” he contended, Las Vegas Sands’ push for land-based gaming has cluttered the discussion.

“Eighty lobbyists last year couldn’t get it done,” Bussmann noted, adding a gloomy prediction. “Unfortunately, it could be rinse, repeat” in 2023. (Bussmann is a former director of government affairs for Sands.)

In California, where the issue will go directly to the electorate this year, voters could be confronted with as many as four competing sports-betting initiatives. One of them, already qualified for this November, would permit retail wagering at tribal casinos and horse tracks. A second “catch-all” approach to the issue is backed by the Golden State’s card clubs, but Bussmann doesn’t think it will qualify for the ballot, given that two newer initiatives have taken the wind out of its sails. One of those is led by a rival tribal consortium that seeks mobile sports betting, as does a petition drive steered by gaming-industry heavyweights, such as DraftKings.

“I am bullish that something’s going to pass,” said Bussmann, implying that it would be the retail proposal, since if there are two OSB initiatives on the ballot, voters are apt to react negatively and vote down both. Still, “It’s a ballot-driven state … because I can’t ever see the legislature getting consensus along the way.” At least, he concluded, “You don’t have the stupidity of New York and its egregious [tax] rate.” With that statement, Bussmann tried to allay institutional investors’ concerns about California sports-betting imposts.

As for Florida, he said, “We’re basically back to Ground Zero,” following Judge Dabney Friedrich’s rejection of the Seminole compact. Noting that official Sunshine State tallies of petition drives tend to lag the reality on the ground, the former lobbyist predicted that both a FanDuel/DraftKings sports-betting initiative and a Sands-driven one for more land-based casinos will make this year’s ballot. Maybe.

“You’ve got another round of court challenges in there,” Bussmann warned. “It could punt to 2024. I see Florida as a food fight in the short run.” Even in the event of a favorable appeals-court ruling this year, “The chance for ’22 revenue would be small at best.”

Moving quickly through other recent movers in sports betting, Bussmann characterized Maryland as “the Oprah State: ‘You get a license! You get a license! You get a license!'” The resultant preponderance of beneficiaries will slow down the Free State’s implementation of sports wagering.

Puerto Rico, though flying under the radar, may be live by the Super Bowl. “I expect the big players to be down there.”

Nebraska, however, is still a year away – “only a land-based option and a screwed-up version,” as you have to be in a casino to place a mobile wager. No regulations have been written and Gov. Clay Ricketts is no friend to gambling.

As for one recent launch, Arizona’s, “I was not surprised at all by the revenue. It’ll only grow.” Still, there’s discontent among tribes and other would-be operators who have found themselves on the outside looking in.

Arkansas and Missouri are also studying adding OSB. Massachusetts, surrounded by sports-betting-enabled states, still doesn’t have any form of it. Bussmann is hopeful, citing the state Senate president as the main obstacle to passage.

Bussman’s other states with potential include Georgia and Alabama, the latter as part of a larger sports betting/lottery/casino discussion. Bussmann reserved some of his harshest words for North Carolina lawmakers: “You’ve had every opportunity to get it done and you haven’t.” Indeed, the picture that emerged from the analyst’s wider synopsis was one in which sports betting is losing momentum heading into an election cycle.

That, however, is nothing compared to the rough sledding faced by Internet gambling. “It’s a more difficult argument to have,” Bussmann conceded. “Sports is mainstream, is part of our everyday conversation.” But the gaming industry still has to convince legislators of the safety of “putting a casino in everybody’s hand. It [also] hasn’t moved as fast, because the money argument’s not there,” given that states are currently awash in federal stimulus dollars. Indiana may be the next state to move on the issue, but it’s going up against a push for slot routes instead, while the Iowa is studying igaming and will present its formal findings this month.

A resident of Nevada, Bussmann had some stinging words for its “quote-unquote gold standard of gaming” and “antiquated” in-person registration for OSB. As with cashless gaming, he blamed regulators as being at the root of the problem. “The industry needs to continue to push [cashless], because it’s an easy conversation.”

As for a Macanese recovery, he said it will be “a significant period of time” before 2019 levels of revenue are regained. As a for-instance, he cited a current two-week suspension of international flights, even though COVID prevalence is “a millionth” of what it is in the U.S.

While optimistic on casino-concession renewals, Bussmann pointed to Beijing as a key player in near-term events. The central government “knows what it wants to do. They’re going to be a part of this.”