Sports Gambling Panel Discussion Highlights Different Perspectives

This panel discussion was during last year's Sports Analytics Conference at MIT.  The panel session is about an hour and fifteen minutes, but pretty interesting.  I'm not going to comment on the video as you should view for yourself.

The next conference is scheduled for March 1-2, 2013 in Boston.  The link to the panel discussion is here.

No Chance for Federal Poker Bill in 2012

The Las Vegas Review Journal recently reported that the attempt by Congress to legalize online poker won't happen this year.  The AGA as well as those that wanted to have centralized control of iGaming in the US have been pushing for Washington to create a one size fits all approach.  That plan was thwarted for a couple of reasons, mostly due to politics.

First, this was an election year.  Not much was going to happen this year anyway.  The normal partisan environment was even more so.  Due to the even more partisan contest, any chance at a bipartisan approach to this issue was squelched.  Harry Reid, the Senate majority leader from Nevada, was very keen for this legislation.  No way were the Republicans going to do any favors for Harry Reid.  I would be surprised if this acrimony doesn't carry over into next year.

Second, with the fiscal cliff issue top of mind, that's what's going to be worked on as the primary topic, not online poker.

For now, online poker will move forward on a state by state basis.  A few more states implement on their own, and the window for any federal-level approach will be permanently lost.  That may likely happen as soon as 2013.

Ontario Racing Transition Panel Interview

This is an interview of the gentlemen that put forward the framework with regard to the transition of Ontario racing away from the Slots At Racetrack Program (SARP), to a more self-sustaining model. The conventional wisdom is that racing in Ontario could be reduced by more than half. The Ontario government really hurt racing due to this action. Even if it is true that the Ontario fiscal situation is dire, such a draconian measure guarantees a massive shock. The better approach would have been to introduce a more gradual change, allowing the industry to adapt.

TVO's Steve Paikin interviews the three members of the Ontario Horse Racing Transition Panel: John Snobelen, Elmer Buchanan and John Wilkinson.

New Jersey Sports Betting Lawsuit Update

In the last couple of weeks there have been a couple of events regarding the lawsuit challenging New Jersey's efforts to initiate sports betting.  Several sports organizations (read leagues) filed suit invoking the federal Professional and Amateur Sports Protection Act (PASPA) to keep New Jersey out of the sports betting business.  PASPA, passed in 1993, bans sports betting in all but 4 "grandfathered" states - Nevada, Oregon, Delaware and Montana.

The first event was the ruling by the judge to deny the motion by the leagues to push back the court timetable of the case by 30 days.  The New Jersey interests opposed this motion and the judge sided with New Jersey.  The article on that event can be found here.

The second event was the State of New Jersey filing a brief directly challenging the constitutionality of PASPA.  This is the event that I think will eventually spell the doom of PASPA, and allow any state if it wishes to allow sports betting.  The article on this story can be found here.

The key argument from the brief quoted in the article is very strong and I don't think the sports leagues or the US Government can refute:

“PASPA does not seek to curtail sports wagering by directly prohibiting such activity in some or all states,” New Jersey’s lawyers wrote in the brief. “Instead, it mandates that certain states not ‘authorize by law or compact’ sports wagering and thereby requires those same states to maintain and enforce their pre-existing bans on sports wagering. The Tenth Amendment, under established precedent, does not permit the federal government to ‘commandeer’ state legislative and enforcement functions in such a manner.”

Its one thing for the federal government to exercise its authority to regulate interstate commerce.  What it can't do is mandate restrictions on the sovereign authority of a state with regard to its ability to craft state law.

The other argument here is that under the Constitution, the federal government does not have plenary police power like the states have.  In other words, states have full ability to regulate health, welfare, safety and morality of its citizens - the federal government does not.  The federal system is based on a central government of limited enumerated powers.  The regulation of gambling within a state has always been the purview of the states.  That is why some states allow lotteries or horse racing and some don't.

The next big event will the depositions of several sports league commissioners, initially scheduled for mid-December.  The outcome of those depositions will be of great interest to how this case proceeds.

First Pari-Mutuel Fantasy Contest Yields Interesting Results

As part of its soft launch effort, ProContest.com offered a free play NFL Thanksgiving game.  The game consisted of four yardage-based questions/races:  Quarterback, Running Back, Wide Receiver and Team Defense.

This was the first open offering of this new fantasy sports game that combines pari-mutuel wagering (Win, Place, Show) with fantasy statistics.  This is the first truly innovative concept in fantasy sports game play in quite a while.

For those interested, here's the results for the various game elements along with their final odds to Win as determined by contest entrants:

Quarterback (QB)
Win    Stafford DET / 6:1
Place  Romo DAL / 2:1
Show  Brady NE / 11:1

Running Back (RB)
Win    Morris WAS / 5:1
Place  Foster HOU / 4:1
Show  Ridley NE / 12:1

Wide Receiver (WR)
Win    Johnson HOU / 8:1
Place  Other/Field / 3:1
Show  Johnson DET / 3:1

Defense (D/ST)
Win    New England / 21:1
Place  Dallas / 4:1
Show  Washington / 3:1

For the QB position, there was a tie with regard to passing yards between Stafford DET and Romo DAL.  What separated the two was that Stafford had a better yards per attempt average.  Although both quarterbacks had 441 yards passing (a very good day for both), Stafford did that with fewer passes.

A bit surprising was that how the New England defense went off at 21:1, when they were playing the New York Jets, a bad offensive team this year.  This shows that by exploiting knowledge and skill, players can make some very good choices.

As the launch process moves forward, new games will be offered to allow users to gauge user acceptance and to try new game metric concepts.  Pari-mutuel fantasy sports has the potential to further drive new growth in the skill game areas as well as create new offerings in regulated wagering, particularly with venues already familiar with pari-mutuel wagering, such as horse and dog racing.

Online Poker Lobbying Group in California Quits

The reality that online poker is NOT coming to California soon finally reached consensus with a lobbying group specifically created to push for legalization.  The California Online Poker Association announced its winding down earlier this month, reported by GGBiGames.com.

The politics of the various tribes sunk the opportunity.  The tribes have a great deal of influence in California politics, particularly when it comes to gaming.  Since the tribes were not in alignment, online poker wasn't going anywhere.  Something eventually will come along, but probably not until enough other states move forward and California is faced with falling behind and losing revenue.

Don't Try and Catch a Falling Knife

With the results of this week's Presidential election, mathematically there are now a majority of "takers" - and they voted for the politicians that will give them the wealth earned by others.  For those of you that have not yet read Ayn Rand's ATLAS SHRUGGED, now is the time.  It's long, but required reading for anyone who wants to see the future of the world over the next 10 years.

If you do read it due to the advice here, please do me the favor of commenting to this post with regard to any similarities you see in today's USA and the novel, published in the 1950s.  If you don't think John Galt exists, he does.

Sports Betting Ring Arrested

This week, authorities arrested 25 people across the country, accusing them of participating in an illegal sports-betting ring.  Of those, one of them was currently a sports book director for Cantor Gaming, a leading sports book operator in Nevada.  This person also holds a Nevada gaming license.

According to the story in the Las Vegas Sun, this conduct apparently was limited to this person's individual activity and did not involve Cantor Gaming.  If it did, that could be quite damaging to Cantor, as this activity easily can be foreseen to jeopardize Nevada gaming licenses, if a license holder is actually found guilty of this conduct.

The key lesson to be learned is that although the gaming legal environment in the US is becoming more friendly, it is not totally friendly yet.  With regard to sports betting activity that crosses state or national boundaries, it is still quite unfriendly and illegal.

Those US operators that might want to get ready for legalized online gambling should use this event as another sobering example that extreme care should be undertaken with regard to having any activities in concert with non-US online gambling interests.  With regard to sports betting, US interests would be safe and wise to steer clear of non-US online sports books, regardless of where they are licensed outside the US.

New Jersey Moving Ahead with Sports Betting

The Associated Press is reporting that New Jersey plans to begin issuing licenses for sports betting as early as January of next year, even though the lawsuit attempting to block this expansion of betting is still in process.  New Jersey continues to be aggressive, putting more pressure on the legal process to concede that historically the conduct of gambling within a state's borders has historically been up to the states due to the states' plenary police power, not given to the federal government under the Constitution.

New Jersey, if it prevails, will have shown its methodical attack on the legality of PASPA was well crafted and executed, both on a legal and political basis.  It is my view that New Jersey will ultimately prevail and each state will decide for themselves if they desire to have sports betting within their borders.

Sports betting is desired by the voters of New Jersey, as shown in this year's poll.  Also, Californians are also in favor of sports betting, with a bill to authorize getting just a step away from making it to the governor's desk for signature.  I expect that bill to be revived next spring.  You can read the blog posts on these polls here and here.

For online operators, don't expect any opportunities in the short-term as this betting will be done at physical locations, not online.  Only online pari-mutuel horse race betting will be the only authorized online sports-related gambling in the USA for quite some time.

Can You Really Beat Craps?

There is a school of thought (albeit a minority) that thinks you can turn the house odds on craps to the player's advantage.  I won't go into the various schemes in detail, but the concepts deal with betting systems and patterns, counting the number of rolls a shooter has while still not making their point, setting the dice before throwing and how you throw the dice.

There hasn't been any solid research that proves that craps can be beaten or in other words, no research that shows how the house advantage can be swung to the player's advantage like in blackjack.  Yet these theories continue to exist.  Proponents may be able to show evidence that using their techniques, some positive results have occurred, but that is more explained by short-term variability and low number of trials observed.  These techniques will be unreliable as the long-term mathematical advantage takes over.

For example, let's say I have a craps theory that says you need to blow on the dice and say "no seven" before throwing.  I do that for five throws.  The first four throws indeed are not seven, but the fifth throw is a seven.  Can I say that my system gives an 80% chance of preventing a seven from being rolled?  Sure.  Would you be willing to risk your money at a crap table using that advice?  I certainly hope not.

What got me on this topic was an article in the October 2012 Casino Player magazine.  The article described various techniques of throwing the dice to obtain an advantage.  For a legal throw, the dice need to hit the far wall, so they hit the wall and bounce off the rubberized surface.  The wall of the crap table is lined with rows of pyramid-shaped spongy material, which when the dice hit, tend to have the dice bounce back and in a slightly different direction.  The intent is to keep the dice throws random.  If no such rule existed, players might just line up the dice the way they want and simply drop them on the table or do things that don't really qualify as a roll.  Given this rule, dice rolls are random enough that the game still keeps its mathematical house edge.

Players that desire to use dice control to help their chances try and throw the dice so that the dice get all the way to the far wall, touch it, but just barely.   Their desire is to roll the dice so that their number is up and it is up right at the far end, but not have enough energy to actually bounce off the far wall.  Ahem...  Like that happens with any regularity.  Also, at a busy table, how does the shooter avoid hitting other betting tokens on the table before hitting the far wall, thwarting their efforts?

This article goes in a different direction.  This article states you need to throw the dice so that the dice hit the tips of the rubberized pyramids in such a way that the dice bounce back directly in the line of throw.  I laughed so hard when I read that I was crying.  The author even states that it would be doubtful for even the most expert of "dice controllers" to acquire this ability with any degree of consistency.  Regardless, the author introduces the reader to such phrases of Newtonian physics such as "double point hit," "single-point pop," and "stoopball effect."

I have two degrees in electrical engineering, which require a certain amount of courses in physics, statistics and materials science and I've never heard of such terms.  I'll need to go back to my university and request a refund of my tuition.

So why does the author put this on paper?  Well at the end of the article, it is disclosed that the author has books which you can buy to learn all about beating craps, to include a DVD showing how to throw the dice.  Also the author has a book on how to beat slot machines...riiiiight.

Seattle / Green Bay Disaster - Incompetence or Worse?

The horrible call that ruled a Green Bay interception was actually a Seattle touchdown, giving the game to Seattle, was probably one of the most horrible calls ever in the history of the NFL.  Since it was committed by the replacement officials, it puts even more pressure on the league to settle the labor dispute before any more damage has occurred.  The story on this game and the video of the play can be found here.  But the officiating appeared to be very weird in that Seattle was the ultimate beneficiary.

Many people were unhappy about the result, but in the stories and other aftermath, do you know which group of people were happy with the result?  Bookies.  According to BeyondTheBets, 77% of the money wagered was on Green Bay, favored by 3 points.  The final score was 14-12 Seattle, so with the point spread, 14-9 Seattle.  Remember for this to happen, the referee had to rule a Green Bay interception was a Seattle touchdown.  If ruled correctly the final score would have been 12-7 Green Bay, or with the point spread, 9-7 Green Bay.

So let's take a look at how a bookie's economics look assuming 77% of the money is bet on Green Bay if Green Bay beats the spread or doesn't beat the spread, assuming a total amount bet of $1,000,000.  Also, we're assuming straight bets, where you need to bet $11 to win $10.

In this scenario, $847,000 ($770,000 + (.1)*($770,000)) is bet on Green Bay - 3 and $253,000 ($230,000 + (.1)*($230,000)) is bet on Seattle +3.  If the call was made properly, Green Bay wins the game outright and against the spread.  The bookie needs to pay the Green Bay bettors their $847,000 in wagers, plus their winnings of $770,000 - a total of $1,617,000.  The bookie can offset this with the Seattle wagers of $253,000, but that's not enough.  If Green Bay won, the bookie would lose $517,000 on every $1,000,000 in baseline wagers (not including the 11/10 vigorish) if 77% of the money was bet on the side that actually prevailed against the spread.  Ouch.

But that didn't happen here.  Since the officials ruled an interception was actually a touchdown for the other team, Seattle wins the game against the point spread.  The bookie does much better!  For every $1,000,000 wagered in this scenario, the bookie only needs to pay the winning Seattle bettors their $253,000 plus their winnings of $230,000 - a total of $483,000.  The bookie offsets this with the losing Green Bay wagers of $847,000, giving the bookie a profit of $364,000.  Big difference between losing $517,000 and profiting $364,000.

Assuming $100 million was bet on this game, with the weighting of bets and spread, that call turned a bookie LOSS of $51,700,000 to a bookie PROFIT of $36,400,000.  Don't let the stories in the news fool you to make you think that the money just went from one group of bettors to the other.  It indeed do that but you must take into account WHERE that money came from.  If to Green Bay, money would have to have been PAID by bookies out of their pocket but since Seattle won, no money had to come out of their pocket as the Green Bay bets ensured a big bookie profit.  If a book is balanced with equal bets on both sides, the bookie gets a 4.5% profit.  On $100 million wagered, that would be a profit of 4,500,000.  Not bad.  They got in this case about 8 TIMES as much profit.  Think about that...

So, you may say, $#!+ happens, right?  Well if you watched the game, this wasn't the only interception Green Bay had that was wiped out.  Also, it appeared the calls were very much in favor of Seattle whenever the game outcome against the spread was in doubt for Seattle.

When Green Bay took the lead, they intercepted Seattle on their first play after the Green Bay kickoff, deep in Seattle territory.  An official, however, called Green Bay for roughing the passer, negating the interception.  I saw the play - no roughing.  The Seattle QB was throwing and the Green Bay player was actually at the QB's feet trying to tackle him by grabbing the legs as opposed to a hit up high which can lead to typical roughing activity like contact with the helmet.  Didn't happen and it wasn't a late hit.

But Seattle apparently needed more help.  Later in this series, Seattle had a 1st and 25 (due to their miscues) and threw a deep pass.  The Seattle receiver actually interfered with the Green Bay defender, who had good position, was looking back at the ball and was trying to make a play himself.  The Seattle receiver grabbed the defender at the shoulder, twisting him and even appeared to grab his facemask.  The result?  The Green Bay defender was called for pass interference, a 32 yard penalty.

Now this series ended up at the Green Bay 7 yard line, where Seattle went on 4th down and didn't try a field goal.  If they had and made it, but didn't recover the onside kick, Green Bay would have won the game 12-10, but would have lost against the spread 13-12.  For the bookies to make money on this game, Seattle needed every single break that came their way.

One more thing, but just a conjecture.  Given the side of the field where the pass interference penalty and where the touchdown call was made, it's possible the same official made both calls.  Would have to see the games over again to try and find out the official's number for both of these calls. 

Do I think the game was fixed so Seattle would beat the spread?  I certainly hope not.  These replacement officials are bad.  Remember Hanlon's Razor:

   "Never attribute to malice that which is adequately explained by stupidity."

That being said, I don't think the NFL had the time to properly vet each of these officials from a security standpoint.  Recall the story a couple of weeks back where the NFL scheduled a big Saints fan to officiate a Saints game?  The story can be found here.  Given the money in professional sports here in the US, the players aren't the weak link - it's the officials.  Aren't paid that much and are fairly anonymous, not like players and coaches.  The NBA had a bona fide gambling scandal with officials a couple of years back.  You can read that post here.

Social Casino Games Win Big

Source:  (2012, September) SuperData.

VentureBeat highlights the research findings of SuperData, which shows that social casino games will earn $1.6 billion in revenues this year, climbing to $2.4 billion by 2015.  Social gaming is coming on strong.  With the transition to more casino-type gaming for social gamers, this group is a key target for those operators in jurisdictions where iGaming becomes more prevalent, or even legal for the first time.  The SuperData report focuses on slots, poker and table casino games, so other skill games like fantasy sports doesn't appear to be included, adding even more revenues to this area.

You can find earlier posts that discuss the blending of skill gaming and wagering here and here.

US Horse Racing Economic Improvement 2012 vs 2011?

The Paulick Report published some year over year comparisons of US racing handle, purses and race days.  The story can be found at this link.  The story compares August 2012 to August 2011 as well as year to date 2012 vs year to date 2011.  All metrics show gains.  But is it all good news?  No.

Here's why.  Although a comparison on a monthly basis has value, the timeframe is too short to get a good feel for any trends, positive or negative.  Even publicly traded corporations tend to focus on annual and quarterly comparisons.  We can do that here by looking at the year to date 2012 vs 2011 numbers.

2012 vs 2011:

All Sources Wagering - +2.29%
US Purses - +8.39%
US Race Days - +1.81%

OK, so all positive, right?  Indeed.  But remember we need to take inflation into account.  Let's do that so we can figure out if in constant dollars, wagering is increasing.  Why is that important?  Well, wagering is the revenue that customers (horseplayers) bring to the business.  No wagering, no need for racing...

What is inflation so far this year?  2.23%  You can see historical inflation data here.  So, in constant dollar terms, wagering has stayed flat.  So, is this really bad news?  From 2003 to 2011, real handle has dropped 37% according to a McKinsey study published last year.  Flat handle actually can be considered good news.  Let's agree to that for now.

The question is at what price do we purchase that wagering handle?  You do that via purses and race days.  Taking inflation into account, purses increased just over 6% in real terms year over year.  Race days (with their overhead) also increased by 65.  So it took the industry an additional 65 race days of overhead as well as 6% greater cost in terms of purses ($57,852,060) to keep wagering revenue flat.  In terms of overall industry profit, it appears that the US racing industry actually is LESS PROFITABLE than it was for the same period last year as it cost more money to generate essentially the same amount of sales (wagers).

Casino Screws Up, Points Finger

Last April, players at a mini-baccarat game noticed the same sequence of cards being dealt.  Being smart, they started upping their bets.  When the casino finally figured out what was going on, those players had won $1.5 million.  Wow.  The casino of course thought the players were cheating.  That wasn't the case.  What happened was that the casino was putting new decks of cards into the game without shuffling them first.   HAHAHAHAHAHAHAHA  How stupid.  Casino Operations 101 - you SHUFFLE cards before you put them into the game.

The casino, the Golden Nugget Atlantic City, relied on the promise from the card manufacturer that the cards were pre-shuffled.  But when things started weird, wouldn't you think that it would take less than 41 winning hands before they would do something like shuffle cards?

To the casino's credit, they have paid out over $500,000 of the winnings, but to their discredit have not yet cashed about $1 million.  In addition, the casino has sued the gamblers stating the game wasn't "fair."  Really?  Oh, yes, the casino is also suing the card manufacturing company.

Let's say the casino is right to obtain relief from the card manufacturer.  But pay the players their winnings.  In fact, tout the big win, smile, tell the world that not all players may do this well but when players win, the casino is HAPPY FOR THEM.  That kind of good customer service and recognition is what gets customers to want to visit.  Treating customers badly and suing them for winning, due to your screwup, is bad customer service and what gets customers to not want to visit.

The full story can be found here.  What do you think?

Assembly Committee Shelves Sports Betting Bill

Rather suddenly, the California sports betting bill sailing through the legislature was shelved by the Assembly Appropriations Committee.  A quick article reporting the event is here.  The easy explanation was that California did what it intended and helped goad the opponents of expanded legal sports betting, the sports leagues and NCAA, to file suit to stop the lead state, New Jersey.  According to the California bill's sponsor, they were in consultation with New Jersey to form a "bi-coastal" effort.  Once the sports leagues and NCAA filed the lawsuit against New Jersey, California could stop the bill without having to incur the expense of defending a lawsuit, letting New Jersey bear that burden.  Of course California can support New Jersey by way of amicus briefs, a less costly legal support option.

Although some legal experts feel the federal PASPA (Professional and Amateur Sports Protection Act) law, only letting a few states have sports betting will stand, other legal experts feel the PASPA will be found unconstitutional.  Those experts use the analogy of the government stating that only four states could have theaters that show movies with sound, while all others could only have silent movies.  Another example would be that only one or two states could grow apples, and all other states would be prohibited, being forced to buy apples from those limited sources. 

The arguments the sports leagues and NCAA are trying to make is that legal sports betting impacts the integrity of their games.  They don't seem to be able to explain how legal sports betting in states like Nevada don't impact integrity of their games.  Also, they seem to have been unable to articulate how illegal sports betting (which is most definitely occurring) that would be curtailed and be brought into the open if legalized, is somehow superior in their minds to legal sports betting.  Finally, experts note how states have always had the authority to set the parameters regarding gambling within their states.  The Washington Times has an article that discusses New Jersey's approach. 

It will be several months before this issue is settled, but it is fair to assume that the losing party will keep the issue alive on appeal and escalate to as high a court as possible.  Would this case eventually make it to the Supreme Court?  Perhaps.

California Sports Betting Bill Update

On August 8th, the Assembly Appropriations Committee moved the sports betting bill, SB 1390, into its suspense file, moving the bill to the next step.  Although the term "suspense file" seems like bad news, it isn't.

Bills that impact the budget go to the budget committee, while other bills with financial impact are reviewed by the appropriations committee.  This bill falls into the latter category.  Under the committee rules (both Senate and Assembly), bills that have a financial impact over a certain amount have to pass through the suspense file.  The bill has to be voted to be moved in to and out of the suspense file.  Moving this bill into the file is a necessary step.  The next step would be a future hearing where the bill will have to be voted out of the suspense file (and thereby out of the committee).  At that point, the bill is then back on the Assembly floor for final vote.

The bill has already completely passed the Senate and passed the Assembly Governmental Organization Committee.  If this bill does pass the Assembly, the bill in its current form does need to go back to the Senate for revote so that the Senate can approve the changes made in the Assembly.  Since the Senate previously passed the bill by a 33-2 vote, this revote would be a formality, in my view.

At that point, the bill would go to the governor for signature, with the bill coming into force January 1st of next year.

Zynga Posts Tender for Real Money Poker Platform

Casino Affiliate Programs commented on eGaming Review's story regarding Zynga soliciting for a real money online poker platform.  Zynga's interest in this area is not new.  Read the previous post concerning Zynga.  This is a good move for them as they have been very much tied to social/fun gaming and of course almost completely tied to Facebook.  They need to diversify their revenue streams.

The issue is now ripe as the DOJ several months back, clarified their position regarding the Wire Act and online gambling OTHER than sports betting.  A post discussing that development can be found here.

Zynga's stock price has fallen a great deal since the IPO, and last month there was a management shakeup where the COO was stripped of game development oversight.  Even competitors are throwing public darts Zynga's way.  An executive from Electronic Arts is claiming that Zynga "dropped to their knees."  Ouch.  Here's the link to the article from Escapist Magazine.

Zynga needs revenue and new sources of that revenue.  Online poker is a step in that direction.  They've just released the tender.  However, they do have a current poker platform that allows players to compete for virtual chips.  That game has millions of users, so they are partially down the path.

Nevada Casino Revenue Drops

Bloomberg Businessweek reports an AP story about the 10% year over year drop in Nevada casino win for May.  The state's casinos earned $885 million in May 2012 vs. $984 million in May 2011 - a good size difference.  The Gaming Control Board couched this bad news by stating that this month would have had a tough comparison due to the very good May of 2011.  Still, a 10% drop is tough to explain away that easily.

The "explanation" given by the spokesman actually makes a better argument as an indictment.  The spokesman called this May's numbers a "statistical anomaly," given that there was a strong events calendar, particularly in Las Vegas.  This May, downtown Vegas casino revenue dropped 2 percent, but strip revenue dropped a whopping 18 percent.  How is that an anomaly where you admittedly had a good calendar to draw visitors, but your gaming win drops 18 percent?  I suppose an anomaly, but not in a good way and should raise more red flags rather than less.

Not all regions dropped, however.  Laughlin had a 20 percent gain and Boulder had a 9 percent gain.  So, that puts to rest the "bad month for comparison purposes argument."  The true disasters in my opinion were up north in Reno and Lake Tahoe.  Reno only dropped 6 percent year over year, but Lake Tahoe dropped a unbelievable 27 percent.  Reno and Lake Tahoe have suffered due to the expanded tribal gaming operations in California for a while now, and it is not going to improve unless those regions do something drastic.  You can read posts on California tribal gaming here and here and my post with regard to what Reno and Lake Tahoe should do here.  A post regarding actions with regard to Las Vegas can be found here.

Poll Finds Californians In Favor of Sports Betting

Hot off the presses, a poll by the Field Research Corporation found that by a wide margin, Californians were in favor of legalizing sports betting and by a much smaller margin were in favor of legalizing online poker.  This poll was likely commissioned as there are a couple of bills working their way through the legislative process to legalize these exact things.  The sports betting bill is much further along in the process, having passed the Senate and is now in the Assembly Appropriations Committee, already having passed the Assembly Government Organization Committee.  A recent post on the sports betting bill can be found here.

The poll results were clear.  Any way you cut the population, a majority favored legalizing sports betting.  Republicans, Democrats, Independents, every age group and every geographic location is in favor.  Here is a snippet of the overall results:

Group / Favor / Oppose / No Opinion

Republicans  49/45/6
Democrats    64/31/5
Other            58/31/11

Male             61/34/5
Female         54/37/9

18-39            70/24/6
40-64            53/39/8
65 +              48/45/7

All                58/35/7

This is huge.  For any politician putting his/her finger in the wind, this makes no doubt about the will of the people of California - GIVE THEM SPORTS BETTING!  Oh, and by the way, the question was worded to ask if the person was in favor of sports betting AND having the state tax its proceeds.  So, not just sports betting, but sports betting and taxing it.  I would be shocked if the sports betting bill did not pass and get signed into law, setting up California to join New Jersey in a showdown with the unconstitutional federal PASPA law.  That being said, there are a couple of bills in Congress that would ease the PASPA restrictions, so that states could add sports betting in the next few years if they desired.

The results for legalizing online poker weren't quite as decisive, with a slight overall majority in favor.  The results for sports betting were far more positive - again, a majority of every demographic breakdown in favor.

The details on the poll results can be found here.

Two "Must Read" Horse Racing Blog Posts

There are a couple of recent horse racing blog posts that are so good, that I'm plugging them here.  As readers can easily glean from other racing posts, racing has issues.  These two posts emphasize that and bring some additional statistical and anecdotal evidence to back up that assertion.

The first post is from the CANGAMBLE blog, which focuses on topics of interest in Canadian gambling.  The story discusses some of the history how racing's former monopoly has changed and how that is being manifested today with current issues.  Topics such as takeout, bet types and demographics are discussed, among others.

The post suggests several fixes such as:

1. Lowering takeout
2. Eliminating track-focused "jackpot" bets
3. Adding a nationwide "jackpot" bet
4. Implementing exchange wagering

I won't quibble with these fixes except for one - exchange wagering.  Exchange wagering isn't going to bring new horse players.  It will, however, be of benefit to a portion of the current wagering base as the vigorish on exchange wagers will generally be a lot lower than the takeout on pari-mutuel wagers.  The players will definitely benefit, but the money that will be generated for racing itself will likely be much lower.  That revenue shock I don't think the industry can handle.  If pari-mutuel takeout was lowered, I think that would be a superior approach.  There are other potential issues with exchange wagering that could manifest if not implemented well, such as "bot" wagering hogging the good wagers for the exchange operator, not the player, as well as the potential for profitable race fixing.  Overall, the post is a winner and is recommended.

The second post is from the Horseplayers Association of North America.  Their post asked the question of poker players and sports bettors why they don't bet on horse racing.  The comments were very frank and generally fell into these categories:

1. Takeout or vigorish is too high, so too difficult to make money
2. Conduct that impacts the integrity of the race
3. Not interested in the sport

The last one is the one I'm interested in and I think is key, although the other two should not be ignored.  You bet on what you know and what you are interested in.  Some people bet baseball, but not football.  Some bet football, but only college football.  Why?  They're interested in it and they know it quite well, so they think they can win.  Or, they are interested in it and having some money on a game increases their fan experience.

If you could bet on soap operas, would you?  Probably no.  Why not?  Most likely because you couldn't give a rat's rear end about soap operas.  Since racing is no longer a monopoly, and most betting now is done off-track, people don't go to the races as often.  Also, that means that parents aren't taking their kids to the track.  Kids grow up not knowing anything about horse racing, except occasionally hearing about the big races, or when a horse breaks down and is euthanized or a racing official is accused of wrongdoing or there is a horse drugging scandal.  What do you think gets the most press and what do you think folks tend to remember?  Not rocket science.  Like the CANGAMBLE post, this one is very informative and highly recommended.

In reality, nothing the current geniuses running racing have come up with in the last 30 years have done much to reinvigorate the sport and stem the slow, steady decline of the horseplayer base and wagering handle.  Last year, the Jockey Club chartered a study by the McKinsey consulting firm.  The study showed that racing was losing 4% of its fan base per year.  What was shocking to me is that half of that loss was due to people dying.  Racing's fan base is literally dying off.  The joke I say to people is that you need an AARP card before you're allowed admission to a racetrack.  That isn't that far off as the average age of a horseplayer is 50, which is the age people start getting AARP cards in the mail.

So how to get the younger demographic interested in horse racing?  I've got a pretty good idea about that, so if you're in the racing industry and want to know, drop me a line - my consulting rates are very reasonable!

Good Fantasy Sports Article

The journalism school of Northwestern University recently published an article on the growth of the fantasy sports business.  It doesn't go into great detail on the economics, but does give a good view of fantasy sports with regard to other areas.

The article discusses the new trends in fantasy sports toward short-term contests, making fantasy sports games more friendly to mobile device users as well as supporting products like prediction tools and social interaction (i.e. "trash talk") applications.  What the article does not discuss is the truly new concept YouGaming will bring to the table - applying pari-mutuel wagering principles to fantasy sports.  You can read the professional paper on that topic here.  This is not to diminish the article.  It does a great job of providing an overview of what's currently available.

What is good about this story is how complete it is with regard to covering the evolution of fantasy sports from a paper-based game, to the robust online game genre it is now.  In addition, it does a good job of covering various legal aspects regarding fantasy sports, such as the unsuccessful attempts by the sports leagues to take over control through claims that their statistics were their property and the UIGEA carve-out, legalizing the games by statute.

The article covers a lot of ground but in a concise manner.  Overall, a good read.  Definitely recommended.

FSTA Fantasy Football B League 2012 Draft Roster

The Fantasy Sports Trade Association (FSTA) had its summer conference this week in San Francisco.  Overall a decent conference, but unfortunately for those that attended the San Francisco Giants game in the evening of Day 2, they missed Cain's perfect game by 1 day.  Bummer.

One of the standard events is the FSTA Experts League fantasy drafts.  Even though it is June, we had our draft.  It is tougher doing that even before training camp and exhibition games, but the conferences are scheduled well before the football and baseball seasons in order for the various participating companies to get some business done well before they are tied up with servicing YOUR fantasy leagues.

The general rules for the league are as follows:

It's a 12-team league, with three 4-team divisions.  The regular season runs Weeks 1-14, with Weeks 15 & 16 playoff weeks.  Each division winner plus 1 wild card make the playoffs.  We start 1 QB, 2 RB, 3 WR, 1 TE, 1 Flex (RB, WR or TE), 1 K and 1 Def/ST.  There are 6 reserve slots.  There are NO trades in this league.  For add/drops there is a $100 bidding budget for the entire season where teams can "silent bid" for free agents.

Scoring is as follows:

Passing

1. 1 point per 30 yards
2. 3 points per TD
3. 2 points per 2-pt conv
4. -1 point per int and/or lost fumble

Rushing

1. 1 point per 10 yards
2. 6 points per TD
3. 2 points per 2-pt conv
4. -1 point per lost fumble

Receiving

1. 1 point per 10 yards
2. 6 points per TD
3. 2 points per 2-pt conv
4. -1 point per lost fumble

Kicking

1. 1 point per PAT
2. 3 points per FG 1-29 yards
3. 4 points per FG 30-39 yards
4. 5 points per FG 40-49 yards
5. 6 points per FG 49+ yards

Defense/Special Teams

1. 1 point per sack
2. 2 points per int and/or opponent's fumble recovery
3. 6 points per TD (int or def fumble return, punt or kickoff return)
4. 2 points per safety
5. 6 points for no points scored by opponent
6. 3 points for 2 to 7 points scored

YouGaming drew the 8th spot in the draft, which was a typical serpentine draft.  Here's who we drafted by round:

1. Rodgers, A. QB GB
2. Lynch, M. RB SEA
3. Nicks, H. WR NYG
4. Colston, M. WR NO
5. Pettigrew, B. TE DET
6. Moore, D. WR OAK
7. Spiller, C.J. RB BUF
8. LaFell, B. WR CAR
9. Floyd, M. WR ARI
10. LeShoure, M. RB DET
11. Palmer, C. QB OAK
12. Gerhart, T. RB MIN
13. Green Bay Packers Def/ST
14. Janikowski, S. K OAK
15. Jeffrey, A. WR CHI
16. Royster, E. RB WAS

During the draft, I basically ignored bye weeks and focused on who was best available with regard to projected fantasy points.  That being said, if a particular position was getting thin or to a point where the talent level dropped off significantly, I'd grab a person even though there may have been a better point producer elsewhere.  I did that with the TE pick in the 5th round.

The scoring system in this league definitely is WR friendly, being a PPR league.  Also, scoring for kickers rewards those with range, so grabbing Janikowski makes a whole lot of sense.  Rodgers was available at 8, so I grabbed him.  He or Brady are really the only rational 1st round QBs given this league's scoring system.  For those who have questions/comments about my draft, feel free to comment and I'll give you a feel for the dynamics of our draft.  As with your leagues, you make your plans, but to an extent, you'll modify your approach based on what your competitors do.

You Can Bet on Sports Where?

In the United States, sports betting is greatly restricted by law.  The two key federal laws are the Professional and Amateur Sports Protection Act (PASPA) and the Wire Act.  This does not mean that sports betting does not occur in the US, it's just that the vast majority is done illegally.  Approximately $2.5 billion is wagered on sports each year in Nevada, but that is a pittance compared to the upwards of $500 billion of sports wagers each year in the US.  There are efforts to expand legal sports wagering in the US at the state level, particularly in New Jersey and California.  You can find posts on those efforts here and here.

Other countries are actually farther ahead of the US in recognizing the fact that sports betting is here, it's big and it's permanent.  A colleague sent me some pictures of a sports wagering outlet in a place about as out of the way from the US as possible - Bishkek, Kyrgyzstan.  Where is that?  About 300 miles northeast of Afghanistan!  Kyrgyzstan is located on the western border of China.  See for yourself...Google Maps / Bishkek

What is interesting is the globality of sports wagering AND the reality that English is truly the world's language.  Not that knowing multiple languages isn't useful, but an English-only speaker by and large could get by in many more places than you might think.


 

NFL Betting Season Has Arrived

Cantor Gaming, a leading sports wagering bookmaker, has published initial over/under lines for regular season NFL wins for each team.  They vary from 12 wins for the Packers and Patriots to 5 1/2 for the Browns, Colts and Jaguars.  You can see the initial lines at this link from Yahoo.

It might be a bit too early to make any selections at this point as the initial mini-camps are just finishing up, with regular training camp and preseason activity not starting in earnest until early July.  However, if you feel that no way that the Colts will win more than 5 games this year, go ahead, get to Vegas and put down $135 for a chance to win $100!

California Sports Betting Bill Moves Forward

The California Senate Appropriations Committee passed SB 1390, a bill authorizing sports betting in California, out of committee to the Senate floor for vote.  This is a big step, following on the heels of New Jersey's passing of a sports betting law in January.  As explained by the bill's author, California needs to have a sports betting law on the books so when the anticipated legal battle between New Jersey and the US Department of Justice is fought over the constitutionality of the Professional and Amateur Sports Protection Act (PASPA), California will also have an interest in the outcome.

What has been unexpected has been the bi-partisan support for this measure.  The bill had to pass through both the Governmental Organization and Appropriations Committees, with votes required to move them out (Appropriations actually needed votes to move in and to move out).  All three votes were unanimous, with no abstentions.  Both Republicans and Democrats are in support.  This bill has a real chance of getting through.  To track the bill's progress, you can use this link.

Nevada, currently the state with the de facto monopoly on sports betting, has got to be concerned.  If New Jersey implemented sports betting, yes, that would have some impact on Nevada.  If California implemented sports betting, what does Nevada have left as an attractant to California customers, still a major source of gaming revenue?  There was a previous post that posited an idea to help the northern Nevada casinos deal with increased gaming competition from California.  If sports betting comes to California, all of Nevada may need to consider this.

New Jersey's Split Personality With Regard To Legalizing New Gambling

New Jersey.com reports an AP story regarding the results of a recent poll that shows conflicting desire for various new legalized gambling options within the state.  What it shows is that residents desire to add sports betting to the gambling options of the state, but that they like their gambling at brick and mortar facilities.  The recent poll showed that 58% opposed the establishment of online gambling, with just 31% supporting (the remainder undecided).  This poll occurred after a positive vote desiring sports betting and having the associated sports betting bill signed into law by Gov. Christie.  So more gambling is OK, but not just "any" gambling.

With regard to sports betting, the almost opposite result showed in the poll.  The recent results showed that 60% wanted legal sports betting with just 26% opposed and 14% undecided.  Sports betting (but not online - at physical locations) is what New Jersey residents want.  Since sports betting is happening in large measure anyway, but illegally and not regulated and taxed, legalization helps bring this already existing gambling into the open and also will help generate tax revenue for the state.  A true win-win.

Kentucky Derby TV Ratings Up for 2012, but Appearances are Deceiving

Last Saturday the first of the Triple Crown races was held, won in a late surge by I'll Have Another.  Horse racing in the US has been in a decline for a number of years and is looking for good news where it can.  Related posts on US racing can be viewed here, here, here and here.

It was reported that television viewership was up for the 2012 Derby.  A Paulick Report story noted that the Derby obtained more viewers (14.8 million) than each of the following 2012 sporting events:  the semi-final NCAA men's basketball game between the UK and Louisville, the Daytona 500 auto race, and the Masters golf tournament.

To be fair, the comparisons are all against cherry-picked examples.  The story didn't compare them against major college post-season bowl games or MLB, NBA or NFL playoff games.  The numbers for the 2012 Kentucky Derby were about the same as the average viewership for the weekly Monday Night Football (MNF) game in 2011.  That isn't bad, but remember Monday Night Football is broadcast on a cable network (ESPN) and not an over-the-air broadcast network that has more reach (NBC).  The last year an over-the-air network (ABC) broadcast MNF, it averaged 16.3 million viewers per week, significantly more than the 2012 Kentucky Derby's 14.8 million.  Also, the Kentucky Derby is one of the big races whereas Monday Night Football is the only football game telecast that day, but there are 17 of them per year.  The AdWeek story on MNF's viewership can be found at this link.

From the Paulick Report story*, here are the top 20 Kentucky Derby Nielsen rating TV markets:

1. Louisville 50 KD
2. Cincinnati 34 KD
3. Ft. Myers 62 F
4. W Palm Beach 38 F
5. Buffalo 51
6. Columbus 32
7. Knoxville 59
8. St. Louis 21
9. Boston 7
10. Indianapolis 25
11. Tampa 13 F
12. Orlando 19 F
13. Baltimore 26 PK
14. Richmond 58
15. Pittsburgh 23
16. Greensboro 46
17. Milwaukee 35
18. New York 1 BS
19. Nashville 29
20. Providence 52
21. Dayton 64

*In the original list W. Palm Beach, Buffalo and Columbus tied for #4 and New York, Nashville, Providence and Dayton tied for #19.

I added a couple of pieces of information to the list.  First, I added the city's TV market ranking per the StationRanking.com website.  Second, I added the letter "F" to markets in Florida and either "KD," "PK" or "BS" to markets closest to the racetracks hosting the Triple Crown races: Kentucky Derby, Preakness or Belmont Stakes.  Cities close to Triple Crown hosting tracks should generally have good viewership interest.  Florida, facetiously known as "the retirement state," has a large body of senior citizens, which is the stereotypical horseplayer demographic.

Analyzing this body of data, the results don't look as good.  Only three Top 25 US TV markets are in the top 10 of the Derby viewership markets (St. Louis, Boston and Indianapolis at 8-10).  Of the entire 21 markets listed, only 7 are in the US Top 25.  Of the top Derby TV viewership markets, 4 of the top 10 and 7 of the 21 markets listed are ranked 50 or lower in the top US TV markets.  Of the markets that are close to Triple Crown-hosting tracks or are in Florida, 8 of them are in the top Derby viewership markets.

Overall, although Derby viewership may be higher than previous years, the overall viewership is not all that impressive and skewed toward those markets expected to be interested in the Triple Crown races.  Given the average age of the horse racing enthusiast is 50 or older, racing still hasn't figured a way out of the problem that their fan base is aging and in truth, literally "dying off."

NYRA Takeout Scandal: CEO and General Counsel Fired

There's a big scandal brewing at the New York Racing Association.  Late last week, the State of New York's Racing and Wagering Board, released an interim report into their investigation of incorrect takeout rates.  A telling quote from the report, “various NYRA officials, including the president/C.E.O., were aware that the ‘takeout’ rate was above the legally allowed rate, yet continued to collect it,” appears damning.  Yesterday, the NYRA Board suspended, the ultimately fired the CEO and General Counsel.  In addition, as reported by BloodHorse.com, the state's Inspector General's office began a formal investigation, which could ultimately result in criminal charges and perhaps lead to the stripping of the licenses to operate the Aqueduct, Belmont Park and Saratoga racetracks.

The Daily Racing Form is also involved in this story.  According to the report, there was an email exchange between the NYRA CEO and the publisher.  Apparently, the publication forwarded an email stating the NYRA was overcharging.  The CEO verified the charge and asked the publisher to keep that information confidential, which the publication did, until the issue was discovered and publicized separately.  Quoting the story, "according to the report, 'Mr. Hayward (NYRA) emailed Mr. Crist (DRF) on August 1, 2011, confirming that the reader was correct and requested that Mr. Crist keep the information confidential. Mr. Crist agreed.' "  Why have an industry publication that won't break this kind of news story?  The New York Daily story on this topic can be found here.

Horse racing in the US is in bad enough shape without these devastating self-inflicted wounds.  How much more damage can this industry take before the public and the politicians determine enough is enough?

Montana Horse Racing Path Forward (Part 2 of 2)

Following up from Part 1, this post describes what Montana racing can do given its current fiscal predicament.  To recap, the Montana Board of Horse Racing has a large debt to service and currently two paltry revenue streams.  Simulcast has been shut down and it will take capital to infuse into that option in order to restart.  Even after that is done, the revenue generated will likely be smaller than what had existed before due to the lack of tracks to wager, to include lack of all the Triple Crown races.

Lots of debt and mediocre income or even income potential - what to do?  Well the Board as well as its Advisory Council had great ideas!  Here they are:

The Business Advisory Council's final recommendation (of three) was "maximize funding sources."  (the other two recommendations were in essence to set a budget and pay their debt)

The Board of Horse Racing's recent minutes had this item, "look at other income sources that will bring in income without large setup costs."

All I can say is...wow.  If they keep going the way they are, in my opinion Montana racing is toast.  That would be a shame.

But there is something that is a new income source and doesn't have large setup costs!  What is it?  Really simple.  Implement pari-mutuel fantasy sports wagering in alignment with what was authorized under HB 616.  It can use the existing tote equipment and there isn't a requirement of an upfront payment that the various tracks are demanding for their signal.  It is a game based on professional sports, so what can/can't be done with regard to horse betting is irrelevant to this revenue stream.  It meets exactly what the Business Advisory Council and the Board of Horse Racing identified as an income source.

There are two issues - the game authorized under HB 616 is covered by patent and the revenue breakouts per HB 616 may not be aligned right to keep all stakeholders happy.  There's an easy fix.  The stakeholders (Board of Horse Racing, patent holder, pari-mutuel provider and retail outlets) need to agree on the takeout for each entity, and then the parties by contract will adapt the HB 616 takeout.  Again, easy fix.  With approximately a 26% takeout in total per HB 616, there's enough of the takeout pie to go around.

By implementing HB 616-compliant pari-mutuel fantasy sports, the Board of Horse Racing will get additional revenue which it can use to pay debt and get simulcast restarted, adding that revenue stream.  These new combined revenues should put the Board on a more solid footing to dig themselves out of their financial hole as well as begin to revive live racing in the state.

If they don't follow this approach, do not be surprised if racing in Montana will be put out of its misery to the anguish of those that put their faith in the Board of Horse Racing to do the right thing.

Montana Horse Racing Continued Trouble (Part 1 of 2)

As discussed in a January 2012 post, horse racing in Montana is in very dire straits.  Due to mismanagement by the Board of Horse Racing, the Board ran up an operating deficit somewhere in the $500,000 to $600,000 range, depending on the current state of the financial audit.  Simulcast operations have been shut down since the end of last year.  Multiple board members have been replaced, and both the Board's Executive Secretary and legal counsel have been released.  Those are positive moves, but are these moves too late?  Possibly.

There are those that are still attempting to revive things and repair the damage.  A former simulcast outlet is attempting to restart operations, but is having trouble due to previous unpaid bills.  Tracks that are owed money by the Board of Horse Racing aren't willing to send signals to the new simulcast operation until they are paid, and in some cases are demanding upfront deposits to ensure they maintain a positive account balance with regard to Montana.

A story in the Missoulian describes the situation.  The current board chairman is quoted that he was informed that Churchill Downs "don't trust Montana at at all" as they declined to allow signals to Montana for the Kentucky Derby.  Similar rejections were mentioned in the article with regard to carrying the Belmont Stakes.

The Triple Crown races are some of the biggest betting days for racing each year, so missing out on those will have a material impact on any full-year measure of handle, assuming simulcast operations in Montana ever restart.  A more recent story in the Montana Watchdog confirms the loss of the Kentucky Derby this year to any revived Montana simulcast.  This does not mean that Montanans can't wager on the Derby, as they can use previously licensed Advance Deposit Wagering (ADW) outlets and wager online.  There just won't be the ability for off track betting (OTB) sites to have wagering.

The existence of the ADW option is a problem for simulcast, even if they could restart operations.  Why would a person travel to an OTB to place a wager if they can have an equal or greater amount of tracks/races to choose from with an ADW and wager online from home?  The OTB has to provide an experience that is superior or an experience that can only be had at the OTB.  Limiting the experience to horse and dog racing wagers isn't going to do the trick.  I find it unlikely that even if simulcast is revived, that the wagering handle will amount to very much.  Examining the minutes of previous board meetings, simulcast was losing customers to ADW competition.

To help the Board of Horse Racing retire its debt and to provide funds for its operation as well as support live racing meets in the state, they're going to need much more money than is being provided by its only remaining revenue streams - ADW and the Lottery-run fantasy sports game.  The revenues from those sources may not even be enough to meet their annual debt repayment plan.  Where is the Board going to get the money needed to pay the deposits now required to allow simulcast to restart operations and cover their initial startup costs?  We're not even thinking about where the money is going to come from to support live race meets.  Too much debt, paltry current revenue and a simulcast operation that won't provide a superior alternative to existing ADWs is a bad combination.

With regard to the Lottery-run fantasy game, there is a danger.  That danger was highlighted by the Audit Division of the Montana Legislature.  Their finding was that the fantasy sports game as currently run was outside of statute, thereby illegal.  Given that finding, it could be possible that bettors that lost money playing that game could sue to get their money back.  If so, then the revenues counted on to pay back debts may be in jeopardy.  The post on that audit can be found here.

I don't see Montana horse racing digging out of this mess if current efforts continue.  Is there another potential path forward?  That possibility will be discussed in Part 2 of this post, which can be viewed here.

Expansion of Online Gambling in USA Will Lead with Poker

Casino Journal magazine discussed the efforts to exploit online poker as a lead product in the establishment of the regulated internet gaming market in the US.  The article was part of the April 2012 issue.  With the recent DOJ policy change on online gambling's coverage under the Wire Act, which I posted on here, poker is going to follow the expansion of internet lottery as state lotteries are already expanding their operations online.

The Innovation Group published an estimate of historical and projected growth of online gambling in the US that was published along with the article.  The chart is below:

Source:  Doocey, P. (2012, April) Chipping AWAY, Casino Journal, 20-27, and The Innovation Group.

They are estimating a growth rate of over 29% given liberalization in the US.  I don't know if that growth rate can be achieved, but if those numbers are simply a return to what used to occur (or would have occurred) in the US if the UIGEA did not exist, then perhaps yes, these numbers are reasonable.  My view is that the growth rate will be lower for two reasons:

1. Liberalization will take a longer time coming than anticipated, and
2. The economic recovery will continue to be very slow and lethargic.

Even if the growth rate is on the order of 15% per year starting from a baseline of $4.3 billion in 2012, that would result in a number in 2017 of $8.6 billion.  That is almost double the 2012 projection, but well short of the chart's estimate of $15.6 billion.

US Department of Justice Changes Stance Regarding Online Gambling

This major change from the US Department of Justice (DOJ) came out just before Christmas last year, but it is important to review just how big that change was. What the DOJ declared in its new opinion was that it practically reversed itself with regard to its position that all online gambling was illegal pursuant to the Wire Act. Its new position is much more rational and based on the law, which is that the Wire Act prohibits interstate sports betting.

Now the Interstate Horseracing Act took care of the issue with horse race wagering, but the prohibition on interstate betting on other sports is still in place. As an aside, interstate betting on dog racing also uses the Interstate Horseracing Act as authorization, but I don't think dog racing was specifically mentioned as an authorized activity. However, no one has been called to account for accepting wagers on dog races across state lines as far as I know.

What does this new opinion do? This opinion really benefits the states and allows them to offer things like internet poker and casino games within their states as the risk of inadvertent communications moving across a state boundary is no longer a legal threat. For the states specifically, the gambling game that is going to be exploited right away is lottery. Interstate lottery ticket sales are going to expand. After that, intrastate internet gambling on poker and casino games will come online, then those games will expand to interstate operations.

The window for Congress to have some federal control of activity historically the province of the states has passed, with the exception of sports betting. That also may be something that will come to an end with the recent passage of a sports betting bill in New Jersey, setting up a potential legal challenge to the federal Professional and Amateur Sports Protection Act (PASPA), which prohibits sports betting in all states but a grandfathered few. Professor Nelson Rose has a great view of the constitutionality of PASPA. He states, "I expect courts will strike down PASPA. Imagine a federal law that allowed only some states to have movie theaters with sound - it just wouldn't hold up." [1]

Now could a new administration reverse this DOJ opinion? Sure, but I don't think so. If states are moving forward with their efforts to expand gambling as a means of raising tax revenues, it would be politically difficult for a new administration to stamp out that activity without leaning on a very weak read of the Wire Act and facing off against multiple states in federal court. Once the horse has left the barn, not easy to get it back in.

Internet gambling is coming to the US, led by the states on a state by state basis. It's about time.

Citations:

[1] Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 31.

References:

Rose, I. (2012, February), DOJ Says States Can Legalize Internet Gambling, Casino Enterprise Management, 30-31.

Comparison of Horse Racing Advertizing

It's well known that the horse racing industry in the U.S. is in decline and has been so for a number of years. To the industry's credit, they are trying to market to attract new customers. This post will show video ads made by a couple of organizations to show the different approaches. In my opinion, all the ads show innovative thinking; however, innovative thinking does not always translate to a good result. Take a look for yourself!

Here's the first one:



What the heck was the thinking behind this? I go to a shoe store, get some horseshoe-shaped athletic shoes and I slam dunk a basketball over a horse. And THAT is supposed to make me want to go to a racetrack and bet on horses? Really? This ad for the "Sport of Kings" obviously was conceptualized and crafted by the "Kings of Stupid." You think that ad was bad? You can't see the first one they put out that had a nerdy-looking guy go to the same store and get an energy drink that could easily be confused with some alcoholic beverage stereotypically-aligned with a particular ethnic group in the US (one could guess by looking at the store clerk - same guy in both ads). After drinking, the nerd started acting like a lunatic. That ad was SO BAD, you can't even see it anymore - it got pulled off of YouTube.

Where in these "Hoof Locker" ads does the viewer get the hook with regard to attention, interest, desire and action to go to the races? I can't see it, sorry.

Now here's another ad that at least gets the message across about horse racing and racetracks:



Now, this is funny and not stupid or ethnically repulsive. There's a one-minute version of this ad also available for view on YouTube. This ad may not get you to the track, but the viewer has no doubt that this ad is about horse racing and the experience of going to the racetrack - hey, you might get to catch a horseshoe! This ad is much better than the "Hoof Locker" ad.

The same group also put out this ad, which I think is the best of the bunch and communicates the benefits of going to the track the best. It highlights the social aspect, fun with friends, younger people, good food, a chance to win, a clean facility, upscale dining environment, getting up close to the horses, the jockeys, etc. - the complete experience. Overall, the last two are much better than the first. What do you think?



There are other posts on this blog that discuss horse racing, which I recommend you peruse. The most recent can be found here, here and here.

Australian Betting Operator Argues For More Regulation To Level Playing Field

The Melbourne, Australia paper Herald Sun reported on remarks made by David Attenborough, the chief executive of Tabcorp, a leading Australian gambling company. His remarks were made at a luncheon of the American Chamber of Commerce in Australia. As an aside, I find that an interesting name of an organization. I understand an Australian Chamber of Commerce, but an American Chamber of Commerce in Australia? They however are legit and focus on international commerce, particularly between the two countries.

His point was that Tabcorp was following the law and allowing sports betting via telephone but not online. However, there were operators taking online sports bets that were not being taken to task for violating the restrictions contained in the Interactive Gambling Act. That is reasonable. If a government is going to place restrictions, the legitimate operators are competitively hurt if they are the only ones to follow the law.

But what I feel are the most poignant comments by Mr. Attenborough were the generic comments regarding sports and sports betting. He is spot on and governments need to grasp and accept this reality. His two key points are:

1. Sports betting is becoming "part of everyday entertainment"
   
2. "Sport is much more exciting when you bet on it"

Absolutely true and blatantly obvious if you look at the amount of sports betting going on globally, both legal and illegal.

The skill game of fantasy sports also benefits from these truisms. Those who play fantasy sports do have their enjoyment of the event enhanced by tracking their team, interacting with the other participants in their league, etc.

Governments need to get on the winner of regulation rather than the loser of prohibition. Prohibition does not prohibit anything if the activity is in high demand - it just creates a lucrative and unregulated black market, which is not at all helpful.

Even with this issue, Australia does seem to get it much better than the U.S. There is an earlier post that discusses partnerships between Australian professional sports teams and online gambling firms. For additional information on Australian gambling, check out this post from January of 2011.

For those interested in a not so well published topic, this post discusses the linkage of the founders of professional football (NFL) in the U.S. and gambling. Also the post discusses how the NFL works with the legal bookmakers to help protect the integrity of the games by detection and reporting of unusual betting patterns. This idea is another good reason for Australia to further embrace legal and regulated sports betting, even online.

Exchange Wagering Going Nowhere Fast in California

A working committee of the California Horse Racing Board (CHRB) met in February to obtain industry feedback on the implementation of exchange wagering in California. Exchange wagering was approved by the legislature, with the crafting of rules delegated to the CHRB. The Thoroughbred Times reported on the four-hour meeting with the result that the committee would make no recommendation to the full board for implementing exchange wagering at this time. According to the story, "committee members said there appeared to be too much opposition from key industry players to current plans and suggested more discussion is needed."

Opposition? That's an understatement. Were there some proponents? Sure. Betfair (the company that is prepared now to offer exchange wagering), Del Mar racetrack and the Horseplayers Association of North America (gamblers). It only makes sense that Betfair would be in favor as they would operate the wagering platform. The horseplayers are naturally in favor of any wagering modification that reduces takeout (vigorish).

Del Mar racetrack could be considered a non-profit, as opposed to other tracks in California, such as Golden Gate Fields and Santa Anita. Both of those for-profit venues were strenuously opposed to exchange wagering. Representatives for those entities stated that those tracks would not approve exchange wagering on their races, even if the CHRB approved rules. There may have also been a threat of legal action if the CHRB approved exchange wagering at Santa Anita and Golden Gate Fields without those tracks' approval.

The current issues with exchange wagering apparently are:

• Cannibalization of current pari-mutuel pools
• The ability to bet on horses to LOSE (danger danger danger)
  
• Lack of protection of jockeys from arbitrary charges of race fixing
• Insufficient takeout and increased handle to compensate for lower pari-mutuel handle
• Possible "cost-plus" takeout scheme for exchange wagering operators
  
• De facto monopoly for the lead vendor proponent (Betfair)
• Not all entities economically benefit from exchange takeout compared to current scheme
  

That's a LOT of issues. I read the entire 199 page transcript of the proceeding. If you like, you can do the same by clicking here. There was much more than what was reported by the Thorougbred Times. It appeared to me reading the transcript that Betfair may not have as elegantly made their case to the point that some may come to the conclusion that Betfair may have been more spin-heavy as opposed to just stating solid facts and evidence in support of the exchange wagering concept. (Yes, I'm being deliberately diplomatic in my language).

In my opinion, exchange wagering is not going to happen in California anytime soon, if ever.