A Minnesota state lawmaker said Thursday to look for professional sports leagues to seek gambling revenue from in-running sports betting from their games.
State representative Patrick Garofalo, a Republican who represents District 58B, told an audience at GiGse 2018 that sports leagues are beginning to learn the economics of the sports betting industry, and that their demand for a 1 percent integrity fee on all handle isn’t feasible. Sports books in Nevada make about 5 percent on sports bets.
“That’s the shiny object,” Garofalo said of the Nevada profit margin. “It was pretty clear that asking 1 percent on the gross handle showed they didn’t understand the economics.”
Garofalo said he has been approached by one league, that he declined to name, that did not want casinos to be able to take bets on second-half wagers. The league wanted control over in-play wagering and its licensing and content.
“There’s a delay in the satellite feed, and they want to own that content,” Garofalo said. “As we go forward, you will see less focus on the integrity fee and more focus on in-play betting. (The leagues) want to be the owners of the content and the only providers because it’s in their stadium, and they supply the information that decides the wagering.”
“That’s definitely stupid,” Seth Young, executive director of online gaming for Foxwoods, said of the sports league proposal and explanation.
Young said that the technology has caught up to the speed of the games, and there is no issue with casinos running in-play sports betting. There’s even the option of shutting off the application. He said there’s no advantage to someone betting at a stadium, either.
Scott Butera, former commissioner of the Arena Football League, said the leagues will try to gain leverage by claiming that they are licensing their content, since they know that the one area they control is the data and venue.
Butera said he’s seen first-hand the growth of sports wagering when he attends the NHL’s Vegas Golden Knights games in Las Vegas.
“You see people walking around with their phone and betting during the game,” Butera said.
He went on to say that the leagues have figured out how well betting fits in with emerging trends regarding how people are starting to consume live sports.
“If you look at the next generation, millennials, and what they like to see, it’s no longer (all about) taking a pilgrimage to a giant outdoor arena and sitting there for four hours… watching a game and going home and having beer and hot dogs along the way.”
Sports betting, Butera said, builds more excitement for fans and teams, which in turn will drive viewership and advertising dollars that will help to enhance the value of the franchise.
Partnerships would work best, he said.
“I think it would be good for operators, for states and, I think for the leagues and teams… they would do well in a number of different ways.”
As for state legislation, Garofalo said that states have learned from the mistakes Pennsylvania in creating a high barrier of entry for the sports betting market and imposing a high tax structure on gaming providers. States will create value by limiting the number of licenses available, not on the brick-and-mortar side, but on mobile wagering, he said.
“By having only a certain number of providers with a guarantee of exclusivity, they will create scarcity, so people will be willing to pay for that and states will get additional revenue.”
Garofalo said that now is an important time for state governments, which will be making decisions that will have an ongoing impact for the next 20 to 30 years. The problem is that many states and legislators lack that expertise. He recommended that state governments across the country use the wealth of experience available in Nevada as a guide when creating their own legislation.
“This is an exciting time to be involved in gaming… the bad news is you have to deal with guys like me,” Garofalo joked.
Seth Young, director of online gambling at Foxwoods, said the key to the U.S. sports betting market will be converting the black-market players, which will be difficult. It won’t be like in Europe, where they are margins of 10 percent.
“You are creating a structure… you want to make sure you are taking into account the low margin and not killing it with taxes and integrity fees,” Young said.
The more casinos can reinvest in the product, the better it will be, Young said.
“To move those folks over to a legal and trusted environment, you need to have a competitive structure… those unlicensed operators are not playing by the same rules as you,” Young said.
