Paul’s Blog May 21, 2018
Honesty is the best policy, at least when there’s money in it. Mark Twain.
It finally happened. The U.S. Supreme Court has removed the federal prohibition that denied the states the right to regulate sports-betting.
Sports-betting, like all other forms of gambling and lottery, continues to be prohibited by the federal government until and unless it is legalized and regulated by the state government. But now the states do have the authority to legalize and regulate sports-betting. And many are poised to do just that post haste. So, now begins the process wherein states decide what they want to do, whether they want to legalize and regulate sports-betting or do nothing which means that it continues to be prohibited by federal law in that state.
Once the state decides that it wants to legalize and regulate sports-betting, it then needs to decide exactly what kind of regulatory model it wants to implement. Some states may emulate the Nevada model in which multiple licenses are granted to commercial operators of land-based casinos and online websites. Others may apply more restrictions, like requiring that all sports-betting be operated in a land-based casino.
What kind of tax rate and government-oversight infrastructure should apply? Hopefully, governors and legislators will act in the interests of the people who voted for them as opposed to the commercial casino interests who fund their political campaigns. If they do, they will consider the facts which lead to the conclusion that the model that channels maximum economic benefit to the people, the model which subjects the operation of casino gambling to the highest standards of consumer protection and responsible gaming, can be found in states like Rhode Island, Delaware, Maryland, New York, Pennsylvania. Not Nevada. Not New Jersey.
Believe it or not, both New York and Pennsylvania generate more income for the state and the benefit of society than Nevada does. And Rhode Island and Maryland casinos produce more income for their states than New Jersey does. The low-tax-rate, multiple-operator, market-driven model of Nevada enriches commercial operators, private shareholders, and the politicians whose campaigns are funded by them. But if the shapers of public policy base their decision on what is best for the people of the state, they will look at a multitude of factors that affect the welfare of the citizens of their state, the people who voted for them. We hope state legislators will consider the advantages of putting sports-betting under the management of their own state Lottery. After all, state lotteries generate far more income for the benefit of society than casinos do. To be sure, these issues are complex. There are lots of moving parts and a wide variety of factors that should inform the process of assessing the pros and cons to the different approaches in a judicious manner. The needs and public policy objectives vary from jurisdiction to jurisdiction and so will the efficacy of the different approaches to managing sports-betting. This discussion is just beginning, and we are just seeing the tip of the ice-berg. One thing we know is that the games-of-chance industry will be forever changed by the Supreme Court ruling in defense of states’ rights to regulate the industry, and by the expansion of sports-betting. Let the games begin!