US sports betting expansion is no slam dunk - 15 May 2018

Supreme Court decision to allow wagering on games sets up battle on dividing the spoils

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US sports leagues responded cautiously to the ruling, with the National Basketball Association saying 'the integrity of our game remains our highest priority' © AP

Kadhim Shubber in Washington and Murad Ahmed in London MAY 15, 2018

British bookmaker William Hill made a bet in New Jersey this year, wagering that a long-running legal battle over sports betting in the US state would result in the legalisation of gambling on lucrative games such as football, basketball and baseball.

Joe Asher, who runs its US arm, ordered his team to lay the groundwork so that William Hill could offer sports betting at Monmouth Park, New Jersey’s coastal racetrack, within weeks of a decision.

On Monday, the bet paid off as the US Supreme Court ruled in favour of New Jersey in its long-running effort to introduce sports betting, striking down a 1992 federal law that banned all but a few states including Nevada from promoting gambling on sporting events.

The ruling placed the decision of whether to allow wagering on competitive games firmly in the hands of state legislatures, putting New Jersey at the forefront of what could become the widespread legalisation of sports betting across the US.

But while gambling on sports could come to Monmouth Park as early as next month, the Supreme Court’s ruling is just the beginning of a broader tussle between states, gambling companies and sports leagues about how the betting would work in practice and how to divide up the spoils.

“We’re going to have an epic celebration tonight,” said Mr Asher on a call with reporters on Monday as William Hill’s share price jumped 10.7 per cent. “Then tomorrow the hard work’s going to begin.”

The potential prize is the illegal sports betting market in the US. The gambling industry estimates that $150bn is wagered on sports in the underground market each year, a significant source of money for organised crime that advocates of legalisation hope can be diverted to legitimate businesses that pay tax.

The task of drawing customers away from illegal sports bookies with whom they may have long relationships will be a tricky one as states, along with the sports and gambling industries, try to maximise their revenues without pushing punters back into the black market with high costs.

“The states are going to look to this as a new-found legal source of revenue that they can tax. The leagues are saying, hey, at the end of the day people are betting on our product [?.?.?.] we want our share of the pie,” said Dan Etna, co-chair of the sports law practice at Herrick Feinstein. The players’ associations, too, will “want a piece of what’s coming in here. It’s their membership that’s participating in the games,” he said.

European gambling companies, which have became global leaders in the sports betting industry, have been increasing their presence in the US for several years in the hope that the market could open up.

GVC, the Isle of Man-based group that recently completed a £4bn merger with UK bookmaker Ladbrokes Coral, has three state licences in the US. It said it had a number of partnership contracts with US casinos, racecourses and gaming venues, including a deal to supply technology to an MGM casino in New Jersey.

William Hill entered the US market in 2011, acquiring three sports betting businesses to gain a large share of the Nevada sports betting industry. Paddy Power Betfair operates an online casino in New Jersey, and paid $48m to acquire DRAFT, a US daily fantasy sports site.

Sports organisations responded cautiously to the Supreme Court’s decision on Monday. The Major League Baseball Players Association warned against allowing bookmakers to drive the introduction of sports betting. “We cannot allow those who have lobbied the hardest for sports gambling to be the only ones controlling how it would be ushered into our businesses,” it said in a statement. National Basketball Association commissioner Adam Silver said: “The integrity of our game remains our highest priority”.

The question of how to prevent abuses such as gambling on inside information and match fixing will be a key challenge for states, bookies and sports associations, as the latter push for states to legislate an “integrity fee” that would be levied on the total amount wagered and paid to the leagues.

Nevada, which had a carve-out from the federal ban on sports gambling, does not have such fees, which bookies view as an attempt to grab a slice of the pie. Mr Asher of William Hill dismissed integrity fees as “something for nothing”.

Aaron Swerdlow, a senior associate at Glaser Weil who represents athletes and coaches, said the sports industry’s emphasis on integrity reflected in part its positioning in the battle over fees, as well as real concerns about the impact of gambling on sports and the public’s perception of it.

“There’s one thing for the Supreme Court to say it’s legal. It’s another thing for Americans from a moral perspective to say that we want this in our communities,” he said. “Everyone’s dipping their toes in the water and testing the temperature for bringing this into society.”

The decision by the Supreme Court means “states are free to decide they want to be the next Nevada,” said Brian Burgess, a partner at Goodwin Procter, but it is unclear how quickly they will take up that opportunity. Only a small number of states have thus far made efforts to legalise sports betting — New Jersey, Delaware and West Virginia among them.

While Barclays estimates the US gambling market could be worth $10bn in net revenues to gambling operators, a figure that excludes money given back to punters in prizes, other analysts are wary about the potential for profits.
“A handful of states are likely to move quickly and relatively liberally,” said Paul Leyland, an analyst at Regulus Partners. “More are likely to move slowly and with very restrictive positions. The majority will almost certainly wait and see.”

(The Financial Times)