Gaming and Fantasy Sports Blog

Some Advantages of Online Casinos

2009-07-09T22:03:00.001-07:00

The convenience of online casinos is well known. Where else can, in theory, you can hang out in your pajamas and play slots, blackjack or poker? Or, if you're the boss, play the same at work (I do not recommend this if you are NOT the boss). What you don't get online is the true feel of the crowd and the gaming experience. But that may actually be an advantage.

The Casino Journal reports that casinos and bingo parlors in several provinces in Argentina have been closed due to fears over the Swine Flu. Apparently that government has just publicly declared a health emergency for the month of July, due to the flu. Those brick and mortar operations are closed, not generating a dime of revenue. Online casinos are still open! Can you get sick from a person sitting next to you in an online poker game? Not likely. Advantage online casino!

That's not all. GamingIntelligence.com cites a news item from the Remote Gambling Association, referencing a study from MHA Consulting of money laundering in online gambling operations. The essence of the study that "the absence of cases and examples of money laundering and terrorist financing within the remote gambling industry indicated that the risks were low, highlighting a strong commitment within the industry to prevent and detect any occurrences, to comply with the various legislative and regulatory requirements, and to co-operate with the authorities."

In addition, "online gambling is not a likely accessible avenue for money laundering because the identities of the gamblers are known, the financial transactions between the bettors and operators are all in electronic format, and all of the wagering is recorded." Again, advantage online casino!

If you wanted to launder money in small amounts over a period of time, you likely could do that anonymously in a brick and mortar casino. If you didn't sign up for a Players Club card, used cash, and kept your wagers under a few thousand per day, it is possible that you would not attract much attention, particularly if you did not frequent the same property.

So for a player at an online casino, you get convenience, some protection from disease transmission and knowledge that the site has the capability to hinder the improper use of the facility for money laundering for nefarious purposes. All that and entertainment! Woo Hoo!

Losing Money at Montana Sports Action? Can You File a Lawsuit to Get Your Money Back?

2009-07-03T14:34:00.000-07:00

The Montana Lottery and the Montana Board of Horse Racing have been fighting off questions and complaints about the new sports wagering game, Montana Sports Action, for almost a year - even before the game was commercially launched. In 2007, Montana passed a law legalizing pari-mutuel wagering on fantasy sports in an attempt to help put more funds into the declining Montana horse racing industry. There are related posts regarding Montana Sports action in this blog, with the three most recent being found here, here and here.

One of the key issues that is brought up against the Lottery running this game, in addition to the pathetically poor revenue, is the issue of the legal authority the Lottery has to run a game of this nature. Montana law is that gambling is prohibited unless specifically authorized. Article III, Section 9 of the Montana constitution states:

Section 9. Gambling. All forms of gambling, lotteries, and gift enterprises are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum.

Following the constitution, Montana code Title 23-5-151 states:

23-5-151. Gambling prohibited. Except as specifically authorized by statute, all forms of public gambling, lotteries, and gift enterprises are prohibited; and,

23-5-111. Construction and application. In view of Article III, section 9, of the Montana constitution, parts 1 through 8 of this chapter must be strictly construed by the department and the courts to allow only those types of gambling and gambling activity that are specifically and clearly allowed by those parts.

Now a lottery is authorized, but only under certain parameters. Montana code Title 23-7-102 states:

23-7-102. Purpose.
(1) The purpose of this chapter is to allow lottery games in which the player purchases from the state, through the administrators of the state lottery, a chance to win a prize. This chapter does not allow and may not be construed to allow any game in which a player competes against or plays with any other person, including a person employed by an establishment in which a lottery game may be played.
(2) The administration and construction of this chapter must comply with Article III, section 9, of the Montana constitution, which mandates that all forms of gambling are prohibited unless authorized by acts of the legislature or by the people through initiative or referendum. Therefore, this chapter must be strictly construed to allow only those games that are within the scope of this section and within the definition of "lottery game".
(3) The state lottery may not:
(a) operate a slot machine or carry on any form of gambling prohibited by the laws of this state; or
(b) carry on any form of gambling permitted by the laws of this state but which is not a lottery game within the scope of this section and within the definition of "lottery game".

The Lottery Commission has restrictions on what games it can operate. Montana code Title 23-7-302 states, in part:

23-7-202. Powers and duties of commission. The commission shall:
(1) establish and operate a state lottery and may not become involved in any other gambling or gaming.

So, what's a "lottery game?" Remember Montana authorized a lottery in 1985, so the concept of a lottery at the time was a game such that each entry had the same chance of winning as any other entry, where the winner was determined at random. No skill is involved - a game of chance.

Montana code Title 23-7-103 states, in part:

23-7-103. Definitions. As used in this chapter, the following definitions apply:
(4) (a) "Lottery game" means any procedure, including any online or other procedure using a machine or electronic device, by which one or more prizes are distributed among persons who have paid for a chance to win a prize and includes but is not limited to weekly (or other, longer time period) winner games, instant winner games, daily numbers games, and sports pool games.

It may be problematic for the Lottery Commission to claim that fantasy sports wagering doesn't fall into the "any other gambling or gaming" category. Or does it? Doesn't the law allow sports pool games? Wouldn't Montana Sports Action fit into this category? Assuming yes, then why does the Lottery claim to be running the game in accordance with the pari-mutuel fantasy sports wagering law passed for the benefit of the Board of Horse Racing? That law specifically is not designed to be a game of chance, but of skill. Besides, as stated during a legislative hearing, if the Legislature intended for the Lottery to run this game, they would have made that clear.

OK, so then let's take another viewpoint and state that the Lottery is merely donating money to the Board of Horse Racing and is actually operating a sports pool. Will that excuse fly? Maybe not. If you look at sports pools in Montana and how they operate, they appear to be different from how Montana Sports Action operates.

Here are pertinent excerpts from the Montana code regarding sports pools:

23-5-501. Definitions. As used in this part, unless the context clearly requires otherwise, the following definitions apply:
(1) "Sports pool" means a gambling activity, other than an activity governed under chapter 4 or chapter 5, part 2, of this title, in which a person wagers money for each chance to win money or other items of value based on the outcome of a sports event or series of sports events wherein the competitors in the sports event or series of sports events are natural persons or animals; and,

23-5-503. Rules.
(3) (a) Except as provided in subsection (3)(b), the winners of any sports pool must receive a 100% payout of the value of the sports pool. The winner of a sports tab game must receive at least 90% of the total cost of the 100 sports tabs. The operator of the sports tab game may retain the remaining money for administration and other expenses.
(b) A nonprofit organization that maintains records and opens the records to inspection upon reasonable demand to verify that the retained portion is used to support charitable activities, scholarships or educational grants, or community service projects may retain up to 50% of the value of a sports pool or sports tab game; and,

23-5-512. Sports pool design -- department rules.
(1) A sports pool must be designed to ensure that:
(a) there is at least one winner from among the participants in the pool; and
(b) each participant has an equal chance to win the pool.
(2) Competitors in a sports event or series of sports events must be randomly assigned to each participant in the sports pool.

So, for a sports pool, outcomes of sporting events are the basis of the game, 100% of the proceeds are paid out in prizes (except if run by non-profits), each participant has an equal chance to win the pool and competitors in the event(s) must be randomly assigned to each participant. This isn't at all like Montana Sports Action. I think that it would be difficult to prove that Montana Sports Action is a sports pool game envisioned by the language that authorizes what games the Montana Lottery can operate.

If Montana Sports Action falls outside those boundaries, then the Lottery could be considered to be offering a game outside its charter and the Lottery Commission could be considered to being involved with another gambling game in violation of its powers and duties. This might be construed to find that the Montana Lottery is operating an illegal gambling game. Not that another party could operate the same game legally, but the Lottery has certain restrictions, which according to Montana law, must be STRICTLY construed.

What does all this have to do with anything, you may ask? Maybe plenty, if you have bet money on Montana Sports Action and lost, or you are an attorney with some time on your hands. If the Lottery is not specifically allowed by statute to operate Montana Sports Action, it might be considered to be an illegal gambling enterprise, even if it is a state agency.

Montana code Title 23-5-112 states, in part:

23-5-112. Definitions. Unless the context requires otherwise, the following definitions apply to parts 1 through 8 of this chapter:
(18) "Illegal gambling enterprise" means a gambling enterprise that violates or is not specifically authorized by a statute or a rule of the department.

Here's where it gets interesting to the losing bettor or attorney with time on their hands. Montana code Title 23-5-121 states:

23-5-131. Losses at illegal gambling may be recovered in civil action. A person, or his dependent or guardian, who, by playing or betting at an illegal gambling device or illegal gambling enterprise, loses money, property, or any other thing of value and pays and delivers it to another person connected with the operation or conduct of the illegal gambling device or illegal gambling enterprise, within 1 year following his loss, may:
(1) bring a civil action in a court of competent jurisdiction to recover the loss;
(2) recover the costs of the civil action and exemplary damages of no less than $500 and no more than $5,000; and
(3) join as a defendant any person having an interest in the illegal gambling device or illegal gambling enterprise.

To date, approximately $150,000 has been wagered on Montana Sports Action games. Not a lot, but in this economy, if you've spent some money and lost on this, maybe you might want your money back? If you were an attorney and could say the phrase "class action," maybe 1/3 of $150,000, or $50,000 is a nice payday? With the size and scope of the entities involved in offering Montana Sports Action, perhaps it might be viewed as a "target-rich environment" to an attorney?

Not that I foresee any lawsuits being filed along these lines anytime soon, but who knows? If it did occur, it would definitely stir up the government types and bring even more negative publicity to something that had the promise of helping the horse racing industry in Montana, but appears to be failing in that promise.

Goldman Sachs Predicts US to Legalize Online Gambling, a $12 Billion Market

2009-06-29T19:19:00.000-07:00

As reported by EGamingReview, a Goldman Sachs report predicts that the US will legalize online gambling, creating a $12 billion market. Not that this market doesn't already exist, but now the revenues can be captured (and taxed) legally.

The article focuses on poker and other casino games, and is silent on sports betting. That is where the REALLY large revenue lies. There have been old estimates from law enforcement that up to $1 billion is wagered illegally each week during the NFL season. That doesn't include any other sport, Super Bowl, March Madness, etc. Given the current politics, legalizing online poker and casino games is the easiest first step, not that you should diminish the prospect of legalizing a $12 billion market!

This prediction that online gambling will be legalized isn't that much of a stretch given the Democrats control both houses of Congress and the White House. There are polls and studies that support legalization. A post that discusses a poll supporting legalized online gambling can be found here. A post that reports on the university study recommending legalizing online gambling can be found here. In addition, this blog has other posts regarding this topic.

Mozambique Improves Gambling Climate

2009-06-24T21:17:00.000-07:00

AllAfrica.com is reporting that last week, Mozambican parliament, the Assembly of the Republic, on Wednesday voted to relax restrictions on gambling. The law will now allow casinos to be built pretty well anywhere in the country, updating the previous law that put certain areas out of bounds.

The new guideline for land-based casinos is that instead of a minimum room requirement (250), the casino must be built in association with one or more hotels with at least a four star ranking. So, align the casinos with quality properties, not just those of a certain size. The older minimum room requirement is actually similar to what still is on the books in Nevada.

Mozambique also legalized online gambling! Here we are in the US, with the UIGEA, which Congress is attempting to overturn, and Mozambique sees the situation clearly, and moves to improve their economy by allowing regulated wagering, even online.

They changed their regulatory structure by transferring the oversight of casino operations to their Tourism Ministry, while the former oversight organization, the Finance Ministry, still oversees the money aspects. That is probably a good move if the Tourism Ministry can ensure the proper licensing of casinos and key employees. In the US, the states usually have a separate department devoted solely to gaming regulation.

There is hope in the US to overturn the UIGEA in the political and the legal arena. There is currently a legal challenge to the UIGEA in the courts, which may hear oral argument in the near future. In Congress, US Congressman Barney Frank's bill to legalize online gambling, HR 2267, is gaining co-sponsors, bringing the total up to 30. The Online Casino Reports article is here.

With the change of presidential administration, and with Democrats in control of both houses of Congress, the chances have improved much, but the bill is still in its infancy and has not yet passed any committees.

NCAA Not Happy With Montana Sports Wagering?

2009-06-06T21:37:00.000-07:00

The NCAA is examining sports gambling in Montana to determine if the NCAA should adopt a policy that would ban any post-season or championship play within the state. A Montana TV station's recent article describes the issue, and the reaction by the locals.

According to the article, the NCAA policy is:

"No session of an NCAA championship may be conducted in a metropolitan area with legal wagering that is based upon the outcome of any event (i.e., high school, college or professional) in a sport in which the NCAA conducts a championship."

I suppose the easiest response from Montana is that since the population of the entire state is approximately 1 million, the concept of metropolitan area doesn't apply since there aren't any. Therefore, Montana isn't in violation of the policy. However, if you define the population small enough, any town can be considered a metro area. According to Census data, there are only 3 cities in the state with populations over 50,000, with the largest, Billings, barely topping 100,000. Compare that to India, where they cite the minimum population to be considered a metropolitan area to be 4 million.

Montana got ratted out when NCAA threatened similar action if Delaware approved sports wagering. According to an ESPN article, a NCAA spokesman stated that the University of Montana should not have been allowed to host playoff games last season due to an "administrative oversight." That is possible since the sports betting game in question, Montana Sports Action, was inaugurated in the fall of 2008. For those interested in Montana Sports Action, you can review several posts in this blog on that game.

What is a bit puzzling is how long it takes the NCAA to recognize administrative oversights. For example, how could the NCAA miss a bowl game that is played in Nevada, a state that until recently had a de facto monopoly on legal sports wagering? Perhaps the name of the bowl game was vague and NCAA officials never attended a game in person? How could the NCAA miss a bowl game called the Las Vegas Bowl, played in Las Vegas at the football stadium of the University of Nevada, Las Vegas? Perhaps the NCAA doesn't consider Las Vegas to be a metropolitan area or maybe that the NCAA doesn't know that legal sports betting occurs in Nevada? Of course, sports betting in Nevada has only been around since the 1940s, so perhaps it's too recent of an event for the NCAA to be aware.

Actually the policy is targeted at championship play, rather than general post-season play, so certain bowl games could get a pass. However, how can the NCAA be ignorant of the Western Athletic Conference routinely hosting championship play in Nevada? Approximately in the last year, women's soccer, basketball and golf all had their championships hosted in Nevada. Given the NCAA policy, maybe you can excuse soccer, but does Nevada allow bets on golf and basketball? I think yes.

If wagering on outcomes is the issue, Montana has a good story, whereas Delaware and Nevada do not. Fantasy sports, depending on the scoring methodology, generally is not tied to the outcome of an actual game.

Montana likely walks on this but the NCAA will go through the motions (but perhaps with a warning not to expand sports gambling to include betting on games). If the NCAA does place a ban on Delaware, they may have to do the same to Nevada. My guess is that they will let all of this go away and pretend it doesn't exist.

Different Sport, Same Result: The Failure of Montana Sports Action

2009-05-27T18:52:00.000-07:00

(Data Source: Montana Sports Action)

This is another post that discusses the implementation of a fantasy sports wagering game by the Montana Lottery (Lottery), on behalf of the Montana Board of Horse Racing (BHR or Board). You can review the other posts in order of publication here, here and here. I strongly recommend reading them because in my very humble opinion, they are quite good. Actually, one of these posts was read into the record (not by me) as testimony to the Montana Legislature earlier this year during a committee hearing on HB 503 that sought to amend the fantasy sports wagering law.

After promises of improvement from the Lottery after their inept fantasy football wagering game last year, they perform even worse with their current game based on NASCAR. Although the pitiful result could have been easily predicted, to be fair, enough races needed to be completed to have a reasonable base of results in order to make an assessment.

Now I don't want to brag about my prognostication skills, but I did predict that the auto racing game would be less attractive than the football game with a similar handle trend - some initial interest, realization that the game is poor, and a steady gradual decline in handle. The chart above appears to bear out that hypothesis. To the racing game's credit, it is generating almost 90% of the football game's handle, but 90% of little isn't really that much of an accomplishment.

As disclosed in one of the earlier posts, projections for fantasy sports betting were on the order of $12 million in handle per year. So far, being in operation almost 9 months, the geniuses at the Montana Lottery haven't even generated $150,000 in handle with a SPORTS BETTING GAME. There are possibly bookies in Billings generating that kind of handle. If the game was generating handle as projected, approximately $9 million would have been wagered to date. The game under current management is only generating one-sixtieth (1/60) of the handle projected.

Relevant statistics for the racing game (after 12 races):

Cumulative Handle (Est) - $58,660
Horse Racing Revenue (Est) - $9,385
Lottery Revenue (Est) - $3,520
Retailer Commission (Est) - $2,345 (divided among approx 175 retailers)

This is pretty sad since fantasy sports betting was supposed to generate sufficient revenue to keep the Board of Horse Racing operating and allow live racing to survive in Montana.

Given the continued contraction of live racing dates, perhaps someone at the Board of Horse Racing might be bright enough to figure out that the Lottery handling this isn't working? Oh, that's right, those Einsteins at BHR signed a sole source agreement with the Lottery for, as it is understood, 8 YEARS. Horse industry in Montana, don't worry! Apparently the Board can exercise an out clause giving 1 year notice. However...the Board had the chance earlier this year to do just that, but didn't, when given a bona fide request by a party in January to offer a game in compliance with HB 616. That story will be told in more detail in a future post.

Need to Brush Up on Math Skills? Gamble!

2009-05-17T16:58:00.000-07:00

What, you say? How dare I try to make a claim that gambling has a societal benefit? Don't take it out on me! Take it out on Teri Hatcher, one of the lead actresses on the television series Desperate Housewives. A news item reported on ContactMusic.com that Teri takes her daughter to racetracks (Teri's apparently a horse racing fan) and uses gambling problems to hone the youngster's math skills. As Teri is quoted, "I do use the opportunity to make her understand math and what you're betting and what you get back... so we work on math. It's fun."

There 'ya go. See, responsible gambling can be used to teach kids math! According to the American Academy of Family Physicians, alcoholism affects between 8%-14% of the population. But the Connecticut Department of Mental Health and Addiction services reports that only 2.7% of Americans suffer from problem gambling. Why is this relevant? Because you see much more opposition to gambling than you do to drinking. Seems to me that if these people wanted a more lucrative target, they would oppose drinking. Oh, wait...did that a few years back. How did that work out? Right, no one's drinking anymore. Hmm, tried something similar for internet gambling with UIGEA a couple of years back. How did that work out? Right. No one's gambling online anymore.

So what's going on here? What's going on is that an adult properly instructing her child using a form of entertainment for adults, handled responsibly, isn't such a bad thing. If anything, gambling would be a means to teach math. Addition, subtraction, multiplication, division, probability - gaming math covers all these things.

If you think this is a rare exception, think again. Now not gambling, fantasy sports is also mathematically-focused. There is actually a published mathematics curriculum used in schools right now that leverages fantasy sports to teach mathematics. Effective? Here's a couple of data points:

75% of the teachers agreed that students understand mathematical concepts more now than they did before they used Fantasy Sports and Mathematics

The percentage of 8th grade students who tested proficient at Woodbine School in New Jersey increased from 10% to 54% in one year after using fantasy sports

(FantasySportsMath.com)

There you have it. Find interesting and entertaining ways to teach kids - and they learn. What a concept. Isn't this better for the kids than handing out condoms and phone numbers to abortion clinics?

Delaware Sports Betting Bill Passes House

2009-05-10T10:00:00.000-07:00

The Dover Post reports that the sports betting bill, finally passed the House on Friday. Earlier in the week, the bill had actually failed. The rumor has it that the state's casino operators were in opposition to the original bill, due to the higher gaming taxes and unclear path forward for table games. This blog described other issues with the original bill in a previous post.

The modified bill reduces the increase in taxes so that operators now only will have to pay 43.5% of their gaming revenue. That is a problem. The state should have kept the gaming tax rate at the 37% level. What Delaware is doing is not just adding new gaming options, but increasing the taxes on all gaming revenue.

Let's consider a fast food example to clarify the issue. You have a burger joint. You sell hamburgers, fries and soda. For those items, you pay 10% of the gross profit (price of items minus cost of ingredients). Now, the county health department will allow you to sell cheeseburgers and milkshakes. The price for this expansion is that you will have to pay an upfront fee of $10,000 every year to give you the right to sell cheeseburgers and milkshakes. Not only that, but the tax rate for all food items moves up from 10% to 15%. So, you see in this example, it doesn't really seem like that good of a deal for the burger joint. It isn't.

The original bill was worse, but that was defeated earlier this week. The modification is only slightly better. The increase in the gaming tax rate was reduced to 6.5% from 8%, so the casinos will be paying 43.5% on all gaming revenue. The annual sports betting license fee was cut a paltry half a million to $4 million. The best improvement was putting the table game approval path on a 75 day track to hash out details to present before the legislature.

Politicians seem to live in a world of "orthogonal tuning" when it comes to taxes and revenues. For example, if taxing an item at 20% generates 10 million in taxes, then to a politician it is obvious that raising the taxes on that item to 40% would generate 20 million. Easy! Not so. The politicians, although experts at laws, most of them being lawyers, seem to be oblivious to the law of unintended consequences. When tax rates increase, that has impacts on behaviors and responses. What the government might find in this case that the increase in the tax rate actually results in the decrease in tax revenue.

With regard to the sports betting bill, the casinos will have to operate more lean and mean to survive. As stated in the earlier blog post, the parlay game may not be sufficient to generate lots of interest. Initially, sure, as it is new, but if the game isn't really that good, interest will wane.

What if the casinos, in order to survive, even with table games and sports parlays, had to reduce staff? Is that what Delaware wanted? They might get more revenue from the casinos, but what if one of the casinos close? Will all the revenue move to the remaining casinos? Probably not. With the new legislation in Washington looking to regulate online gambling, it may be in a year or two people can play slots and table games from their home. Why go to a Delaware casino when you can play at home? The only thing the Delaware casinos will have to differentiate themselves is the sports parlay game, which may not be enough.

New Jersey Residents Favor Legalizing Sports Betting

2009-04-29T22:00:00.000-07:00

Fairleigh Dickinson University’s PublicMind conducted a survey of New Jersey residents to get their opinions on making sports betting legal. New Jersey filed suit against the US stating the Professional and Amateur Sports Protection Act (PASPA) was unconstitutional and violated states' rights. You can refer to a recent post on this blog.

The topic is relevant, and the results are interesting. I would have assumed that, even if a plurality of residents favored legalizing sports betting, that a majority of conservatives would have opposed. That is not the case. With the sole exception of the question of online or internet sports betting, residents approved of the legalization of sports betting in casinos, racetracks and off-track betting (OTB) facilities.

Overall, men are in favor more than women, and liberals and moderates are more in favor than conservatives. But, all groups had a majority (and in some cases, strong) in favor of sports betting. Regardless of what the sports leagues may want, it appears that the people seem to approve of the concept.

The survey questions and responses, broken out by sex and political temperament are shown below, courtesy of the FDU PublicMind website.

a. Would you favor or oppose making sports betting legal in New Jersey at Atlantic City casinos?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	63%	69	58	70	67	56
Oppose	32%	27	36	27	28	38
Unsure	6%	4	6	3	4	6

b. Would you favor or oppose making sports betting legal in New Jersey at horse-racing tracks?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	63%	65	61	68	67	57
Oppose	30%	29	31	27	26	37
Unsure	7%	6	8	5	7	6

c. Would you favor or oppose making sports betting legal in New Jersey at off-track betting parlors?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	48%	51	45	52	51	46
Oppose	43%	42	44	42	42	45
Unsure	9%	6	11	6	7	9

d. Would you favor or oppose making sports betting legal in New Jersey by telephone and the internet?
	All	gender			ideology
	All	men	women	liberal	moderate	conservative
Favor	26%	30	23	34	27	23
Oppose	66%	63	69	63	65	70
Unsure	8%	7	7	3	7	6

(FDU PublicMind)

Harrah's Names New Online Gaming Head

2009-04-14T19:17:00.000-07:00

Some commentators may make more of this than just the obvious, but it is another indicator that the trend for online gaming in the USA is on the upswing after the disaster of the UIGEA. RecentPoker.com reports that Harrah's has named an ex-CEO of PartyGaming as chief of its World Series of Poker and Internet operations. The site quotes the Sunday Times as speculating that Harrah's, by combining these two divisions and installing a seasoned online gambling executive at the helm, may be preparing to possibly expand by acquiring other online gambling assets.

That is speculative, but it does appear that Harrah's is reading the legislative trends in the US, and that their view may be that online gambling is going to make a legal comeback. With the Democrats firmly in control of both houses of Congress plus the White House, the UIGEA could be very short-lived. Please refer to earlier posts here and here with regard to online gambling.

At the state level, it is rumored that California may pursue legalizing intrastate online poker and Delaware is moving ahead with legislation to legalize sports betting, as discussed in a recent post.
This momentum would most certainly been much more muted if the Republicans had won the White House. With the Obama administration, online gambling is viewed as a revenue source and not a vice.

Delaware Sports Betting Bill Progressing

2009-04-11T16:39:00.000-07:00

The legislation to authorize sports betting in Delaware passed a legislative hurdle this week. The Delaware House Gaming and Parimutuels Committee released the bill from their committee this week. Certain gaming interests, the NCAA, NFL and anti-gambling interests had been against expanding sports gambling, but the State's need for revenue to relieve a projected shortfall outweighed the special interests' lobbying. More detail on the bill can be found in the Forbes.com article.

The bill keeps the number of casinos at three, but increases the tax rate on slot revenue and institutes a $4.5M sports betting license fee, split among the three casinos. I understand the need for revenue, but increases in gaming taxes don't always translate to increased revenue. In addition, it is important that the casinos are able to generate a profit as well. They are the entities that are taking the business risk.

The sports betting license fee is a bit steep. Assuming the win % on sports betting is 5%, the casinos would have to generate $90M in wagers just to cover the license fee. That doesn't take into their costs of betting lines, sports book property, plant and equipment, advertising and labor costs. The sports bets provided had better be attractive in order to generate sufficient wagering interest. If Delaware just sticks to a sports lottery, requiring a parlay of two or more bets, that offering alone may not be sufficient.

Delaware needs to offer the full spectrum of sports wagers, to include the new pari-mutuel fantasy sports wagers. Fantasy sports is big business, and the three Delaware casinos are racetracks as well, very familiar with pari-mutuel wagering. Also, these tracks already have the proper pari-mutuel equipment in place, just requiring minor software modification to allow pari-mutuel fantasy sports wagers. With almost 30M fantasy sports players in the US, there's a large potential market. Since the population base within a 90 minute drive from Delaware is approximately 35M, there may be as many as 3.5M fantasy sports players as an addressable market by Delaware casinos.

With the pari-mutuel concept, the takeout is much higher than that for parlay bets or straight bets. Pari-mutuel takeout percentages are often 18% or higher. Assuming just a 15% takeout,
only $30M in pari-mutuel fantasy sports wagers would be required to generate the $4.5M to cover the annual license fee. Since the significant portion of the pari-mutuel infrastructure is already in place, this concept could be an easy and profitable portion of the overall sports betting offering.

To learn more about pari-mutuel fantasy sports wagering, see the YouGaming.com website.

New Jersey to Legally Challenge PASPA

2009-03-23T20:19:00.000-07:00

In 1992, Congress passed the Professional and Amateur Sports Protection Act (PASPA). It should have been called the Nevada Legalized Sports Betting and Illegal Sports Betting Monopoly Act. The law grandfathers four states that had some kind of legal sports betting to be able to allow sports betting, but restrict all others from having legalized sports betting. The four grandfathered states are: Nevada, Oregon, Montana and Delaware. Nevada, is by far the state with the largest amount of legal sports betting. Note that illegal sports betting wasn't hampered by this law. All the law did for 46 states was ensure the "Sopranos" didn't have any legitimate competition. How sweet of Congress to take care of the illegal bookies like that!

Congress knew the law was weak and had iffy Constitutional strength. The Department of Justice (DOJ) actually opposed this law on the grounds that it violated states rights. The reference to the DOJ is here. In addition, the DOJ highlighted the issue that the law allowed professional and amateur sports organizations to bring civil injunctions against states. Professor I. Nelson Rose in his article on PASPA mentions that the US Supreme Court has ruled that states can not be sued without their consent. Professor Rose makes the point that if a state can't be sued by an Indian tribe, what real chance would a sports organization like the NCAA have in getting their case allowed?

The law had never been officially challenged - until now. With state governments scrambling for cash, gambling is looking good. As gambling becomes more prevalent, competition for gaming dollars is heating up. Delaware, as mentioned in a previous post, is considering exercising its rights under PASPA and legalizing a sports betting game. This is causing concern among neighboring states which aren't allowed by PASPA to follow suit.

A New Jersey group comprised of gaming and racing interests filed suit challenging the constitutionality of PASPA in US District Court. The link to the Reuters article is here. It likely won't be decided for quite a few months, but the process is started. Will the DOJ fight the suit even though they are on record questioning the law's violation of states' rights?

I think PASPA should be declared unconstitutional and tossed. Then each state can decide if it wants to allow sports betting and get that betting that is currently unregulated going to bookies become above board, regulated and taxed. Everyone wins...except those with losing bets. Even if PASPA was declared invalid, that would not allow interstate sports betting. That would still be in violation of the Wire Act. This would allow intrastate sports betting. So, the betting books and pools would have to be contained fully within the state, similar to how sports betting in Nevada operates now.

If PASPA is declared invalid, it should increase the value of YouGaming's patents. YouGaming could offer very attractive games to these new markets. Fantasy sports is still growing and pari-mutuel wagering offers a higher intrinsic takeout compared to wagering typical of typical sports wagering.

What's the Best Betting Value in the NCAA Tournament?

2009-03-16T20:16:00.001-07:00

So, who will win the 2009 NCAA men's basketball tournament? I haven't a clue, but it will be one of 65 teams. I know, that's a great insight - you can thank me later. Looking at the initial odds posted by the Las Vegas Hilton (referenced in a story in the Las Vegas Sun), there may be some teams that based on the odds relative to their seeding, might be worth a gamble.

I took a look at the odds posted for the various teams and mapped them to their seeding. I averaged out the odds per seed level and looked for teams that the posted odds were significantly above the average. Before I give you the possible values, here's the average odds per seed level:

Seed Avg Odds

5.75
14.25
28.75
47.5
71.25
56.25
100
175
250
200
475
175
400
200
200
200

You can see that there is a natural trend that the lower the seed, the higher the odds, except for the lowest seeds. The LV Hilton sportsbook has most of the teams with discrete odds, with a field entry for everyone else. The field entry for this tournament consists of all 14-16 seeds, plus Northern Iowa and Akron. I don't think the field entry is a value bet, even though you get a chance on 14 teams.

Notice that the 5, 9 and 11 seeds on average pay more than the next lower seeds. We'll look there and also look at other seed levels to determine if a team or two is being offered at a significant differential to the average odds for the seed level.

If we set a level of differential to identify those teams whose odds are 75% higher than the average odds of their seed level, here's what we get:

4/Xavier - Odds 100:1/Seed Avg Odds 47.5:1
6/Marquette - Odds 100:1/Seed Avg Odds 56.25:1
9/Siena - Odds 500:1/Seed Avg Odds 250:1
11/Utah St - Odds 1,000:1/Seed Avg Odds 475:1
13/Cleveland St - Odds 1,000:1/Seed Avg Odds 400:1

If we lower the value threshold to 40% higher than the average odds of their seed level, these other teams appear:

5/Utah - Odds 100:1/Seed Avg Odds 71.25:1
5/Illinois - Odds 100:1/Seed Avg Odds 71.25:1
8/BYU - Odds 300:1/Seed Avg Odds 175:1
10/Minnesota - Odds 300:1/Seed Avg Odds 200:1
12/W. Kentucky - Odds 300:1/Seed Avg Odds 175:1

This will be interesting to see if any of these make a Cinderella run, or, if the oddsmakers are right, they make an earlier exit than expected.

To Combat Gaming Slide, What Do Reno and Lake Tahoe Do?

2009-03-11T19:15:00.000-07:00

As discussed in other posts, the gaming industry is learning that they are no longer recession-proof. By diversifying their revenue streams to rely more on lodging, entertainment and food and beverage, they now are more susceptible to the economic variances in the greater hospitality industry.

Even before the recession, Nevada gaming has been facing an increased threat from other gaming competition. Data provided by the American Gaming Association (AGA) states that casino gambling, at one time found only in Nevada, now exists in 33 states. Tribal casinos alone now exist in 29 states. According to the National Indian Gaming Commission (NIGC), Indian gaming generated approximately $26 billion in revenue in 2007. The AGA also cites that since the early 1990s, online gambling has grown significantly, generating just shy of $6 billion in revenues in 2005, before the passage of the Unlawful Internet Gambling and Enforcement Act (UIGEA). We'll discuss in an upcoming post whether that law actually impacted the patronage of online gambling sites by Americans.

Las Vegas, being a destination attraction in addition to being a gambling mecca, has fared better with regard to gaming competition than the Northern Nevada gaming markets, Reno and Lake Tahoe. These markets have definitely felt the impact of tribal gaming operations in Northern California. For residents in Northern California, if you want to gamble, why drive to Nevada when outstanding properties are less than an hour's drive away? In the last year, gaming revenue in Reno is down 10%, South Lake Tahoe down 23%, North Lake Tahoe 20%. For Reno, this continued the downward trend that begun back in 2007, not just with the recent recession.

It can be estimated that for a gaming property, market share is inversely proportional to the square of the distance from the population center to the property. In other words, the closer you are to the customers, the more customers you should get. As an example, consider two gaming properties near a major city. One is twenty-five miles away and one is fifty miles away. Based on the formula, the property that is fifty miles away would be expected to have a market draw one-fourth of that of the closer property.

The Lake Tahoe and Reno properties are essentially falling victim to their distance from major population centers. The only way to solve that problem directly is to have an earthquake severe enough to move San Francisco and Sacramento about 100 miles or so northeast. That likely isn't going to happen anytime soon. The casinos in these markets provide the same product that the population in Northern California can get much closer to home, with the sole exception of sports betting.

According to Michael Porter's theory, in a competitive market, successful participants can pursue one of three generic strategies. They can pursue either a low cost, niche or differentiated strategy. The Northern Nevada markets may be pursuing a low cost strategy, but it may not be translated to the casino floor. Proper application of this strategy would entail lowering the house advantages on their games to attract demand. People likely would be willing to travel farther to gamble at a location that gives them a better chance of winning.

At first glance, this appears to be a potential useful strategy. It may not be effective, long-term, due to the ability of the tribal casinos to match that innovation. All the low-cost strategy may likely do is commoditize the gaming product, lowering the profits of the overall industry, and leaving the Reno and Lake Tahoe gaming properties in the same competitive disadvantage. Those markets may actually fail sooner, then the tribal casinos would restore their house advantage to prior levels, not having to worry about Northern Nevada competition, then de facto non-existent.

Another approach is to push their advantage in being able to offer sports betting. Unfortunately, sports betting isn't the largest revenue producer in a casino, and isn't likely to become that ever. In addition, the law notwithstanding, dedicated California sports bettors can place their wagers with online bookmakers or their local bookmaker, without having to drive to Nevada.

The most radical inspiration for Reno and Lake Tahoe actually lies to the south. Las Vegas is known as "Sin City." The slogan, "What happens in Vegas stays in Vegas," is very well known. Leveraging Las Vegas and Porter's theory, Reno and Lake Tahoe may differentiate by offering something that can't be copied by competing California tribal casinos. Sports betting is good, but not sufficient. The radical idea is to bring the legal brothels, now restricted to areas outside the major Nevada cities inside the hotel-casino properties. This approach is the most radical because it completely moves these casino properties fully into the adult entertainment realm, otherwise known as the three B's: Bets, Booze and Babes.

If patrons had more on their minds than gambling and drinking, the properties could offer something more in their facilities without the patron having to leave the property and travel. All elements of this entertainment offering would be available under one roof. With regard to these kind of services being offered in a hotel environment, they are not uncommon in Asian hotel properties. In those properties, the definition of "massage" may be a bit broader than is customary elsewhere. Not all properties would desire to offer this element and instead try to differentiate by being family-oriented. If that is occurring now, it doesn't appear to be very effective in countering the California-based competition.

Brothels integrated with the hotel-casino, catering to both men and women, would be definitely a unique but controversial differentiator. It is likely that these services are indirectly available now, but due to this indirect nature, the true advantage isn't being captured. The offering must be convenient and immediately available for those patrons wishing to buy. This does not exist today. Of course, proper layout and location of these "salons" would be required, but with a multi-story hotel-casino property, this can easily be accommodated, similar to the club floors for frequent stay program members that most hotel chains employ.

There will be a need to be a change to Nevada law as well as potential zoning changes and regulatory modifications to allow this offering, so this last ditch effort, if seriously considered, would be an indicator of the severity of the competitive situation.

Maryland Seeking to Legalize Fantasy Sports Contests

2009-02-27T20:57:00.001-08:00

In a positive for the fantasy sports industry, a Maryland legislator introduced a bill to specifically exempt fantasy sports contests from state gambling prohibitions. FOXNews.com reports that Democrat John Olszewski presented a bill this week to a state House committee.

The federal Unlawful Internet Gambling Enforcement Act (UIGEA) has a specific carve-out exempting fantasy sports contests, as long as they operate within certain stated parameters. Maryland is seeking to insert that same language into state law.

Current Maryland law is unclear with regard to the separation of games of skill from gambling, which is why fantasy sports companies generally shy away from allowing Maryland residents to compete for prizes, or shy away from allowing them to participate at all.

There are nine states where state law is not very clear or undifferentiated between a skill game and a gambling game. These states are: Louisiana, North Dakota, Montana, Iowa, Arizona, Vermont, Maryland, Arkansas and Florida. Fantasy sports companies, in general, place restrictions on players that reside in those states. Maryland is attempting with the legislation to make a clear distinction, which will allow residents to fully participate in prize-based fantasy sports contests.

Montana in 2007 passed a law legalizing pari-mutuel wagering on fantasy sports, but that was an expansion of their gambling law, and not impacting the conduct of contests. Fantasy sports contests in Montana are controlled by gambling statutes as well, with the bulk of the contests affiliated with in-person contests, not utilizing online formats.

The proposed Maryland legislation is further confirmation of the continuing popularity of fantasy sports. The Fantasy Sports Trade Association currently estimates 27 million Americans play fantasy sports, an $800 million industry.

Fantasy Sports Website Makes Top List

2009-02-18T17:55:00.000-08:00

As another indication of the popularity of fantasy sports in the US, a fantasy sports website garnered a mention in an iGaming publication. The Jan/Feb 2009 issue of iGaming Business published data from Hitwise showing the top ten gambling sites in the US as of Nov 2008.

Top Ten Gambling Sites in the US, Nov 08

Florida Lottery www.flalottery.com
NY Lottery www.nylottery.com
FreeSlots www.freeslots.com
Pennsylvania Lottery www.palottery.state.pa.us
Texas Lottery Commission www.txlottery.org
Ohio Lottery www.ohiolottery.com
RealTime Fantasy Sports www.rtsports.com
Powerball www.powerball.com
California Lottery www.calottery.com
Illinois Lottery www.illinoislottery.com

Now according to the UIGEA, fantasy sports is not gambling, but to the iGaming businesses that are legally shut out of the US market, they have a certain bias. That aside, to have a fantasy sports site with sufficient hits to be compared to major lottery websites, that is interesting.

Now this list is for US-based sites. Typical online gaming sites, which are not based in the US, aren't eligible for inclusion in this list. What are eligible, but didn't make the cut, are the pari-mutuel horse racing betting sites. Those US-based online gambling sites are eligible for inclusion in this list, but didn't make the top ten.

What will be interesting to see if during the May timeframe, when horse racing's Triple Crown is running, if any of those sites make the list.

References:

Anonymous (2009, Jan/Feb), Hitwise Industry Report, iGaming Business, 129.

Are Anti-Smoking Bans Online Gambling's Friend?

2009-02-07T18:30:00.000-08:00

Land-based casinos are facing another indirect threat from online casinos, and that threat comes from nearby, not from some offshore locale. Anti-smoking laws that impact casinos impact more than just air quality.

For those that like to gamble and smoke, a smoking ban is more than an inconvenience. These patrons often just go home and smoke, and with online gambling, they can gamble and smoke right from their living room.

Anti-smoking laws are not just being implemented in the United States. France implemented a smoking ban last year and evidence is already in that their land-based casinos are feeling the impact.

"There are multiple factors that have directly and indirectly caused the French casinos to face losses in revenue during 2008. First, the smoking ban that became effective on Jan 1, 2008, has radically changed the habits of players. Players were used to smoking and drinking while playing. Instead of quitting smoking, players have preferred to neglect the casino properties. They now play at home on the Internet, where they can smoke while gambling." 1

US casinos have also seen revenues decline after imposition of smoking bans. Tom Swoik of the Illinois Casino Gaming Associate reports that in the first year after the statewide smoking ban that became effective January 1st of last year, Illinois casinos had a nearly 21% reduction in revenue. Although the economy can explain part of the decline, the smoking ban is implicated as the major cause, due to the comparison with casino revenue in Indiana, which has a similar economy, but with no smoking ban. Swoik added that the two states that have been hurt the most are Illinois and Colorado, as both had smoking bans that were implemented.

"'When you compare the Chicagoland market with the Northern Indiana market,' Swoik said, 'the Chicagoland market in Illinois is down 21.8 percent, and Indiana’s down 4.7 percent. They have the same economy and the same weather that we have. In the St. Louis market, Illinois is down 20.3 percent, Missouri’s down 9.9 percent.'" 2

If you have a land-based casino, the lessons already learned are clear. You need to work to ensure no smoking ban is enacted that impacts your property. Moving proactively to create smoke-free gaming and dining areas might be advisable. If your location is in a warm weather location, creating outdoor venues for gaming and dining may actually increase business while staving off anti-smoking laws.

If you are an online casino, exploration of exploiting these laws in your marketing efforts should be undertaken. If your customer demographic has a substantial amount of smokers, highlight the convenience of gaming and smoking without the hassle of "designated smoking areas." As part of the frequent player program, cigarettes, cigars and other smoking paraphernalia could be included as redeemable items or as incentive gifts for new players.

The most bold approach would be for online casinos to actively support anti-smoking efforts that included casino properties for the express purpose of driving customers to the online sites.

Citations:

[1] Verbiest, T. & Pelletier P. (2009, Winter), Rien Ne Va Plus In The French Casino, Casino Lawyer, 26.

[2] Ortbals, A. (2009, February), Cities, state, schools socked by smoking ban impact on casino revenues, Illinois Business Journal, Retrieved February 7, 2009, from: http://www.ibjonline.com/

References:

Black, P. (2009, January 31), onlinecasinosphere.com, Retrieved February 7, 2009, from:
http://www.onlinecasinosphere.com/news/reports/world-casinos/future-of-online-gambling-5396.php

Ortbals, A. (2009, February), Cities, state, schools socked by smoking ban impact on casino revenues, Illinois Business Journal, Retrieved February 7, 2009, from: http://www.ibjonline.com/

Pakko, M. (2008, January), Clearing the Haze? New Evidence on the Economic Impact of Smoking Bans, The Regional Economist, Federal Reserve Bank of St. Louis, Retrieved February 7, 2009, from: http://stlouisfed.org/publications/re/2008/a/pages/smoking-ban.html

Verbiest, T. & Pelletier P. (2009, Winter), Rien Ne Va Plus In The French Casino, Casino Lawyer, 26-27.

Hawaii Lawmakers Consider Gambling

2009-01-26T20:31:00.000-08:00

Legalized gambling often is seen by states as an easy way to get additional revenue without raising taxes. To an extent, they are correct. Many states opt for lotteries as opposed to casino gambling, or if they allow casino gambling, they allow tribal gaming.

Hawaii is one of only two states with no gambling (the other state is Utah). With an estimated budget deficit of a billion dollars, some of the Hawaii legislature is considering legalizing gambling to make up the shortfall.

A story from KHON discusses this effort. What gambling would do in Hawaii is not just provide some additional revenue due to gaming. It would have a positive economic impact on the tourism market. Hawaii is awesome, but is suffering from lower tourism levels, due to the economy.

Imagine Las Vegas with lush gardens, water, sand, mild temperatures - and gaming? Very nice. I think that the time is right to make this move. With gambling growing globally, Hawaii can keep up with those that wish to gamble, but combine that with the outstanding locale to create a "winning" combination.

Typically, gambling operations tend to be the most busy from late afternoon to a bit after midnight. There is not as much gambling in the morning hours. This would work out great for Hawaii hotel resort/casinos. During the day, the patrons would be on the beach and doing the typical resort/tourism activities. At dusk, when the beaches clear, the casinos fill.

It is unknown if Hawaii will ultimately legalize gambling for thier hotel resorts, but they should.

Kentucky Court Stops Governor's Move To Seize Online Gambling Domain Names

2009-01-21T20:04:00.000-08:00

An AP story today reports that a three-judge panel of the Kentucky Court of Appeals rejected the move by the state to seize the internet domain names from 141 online gambling and related websites. This move by Kentucky was done to stop these sites from being accessible by Kentucky residents. You would think all they had to do was just ask the sites to block Kentucky-based IP addresses. Nope. Seems like some folks aren't that bright in Kentucky, particularly the Governor.

Governor Beshear's apparent intent was to keep out gambling competition from hurting the state's horse racing industry, but the way he went about it was very unusual. Quoting from an article in the December issue of CAP Magazine, attorney Martin Owens describes that the person expected to enforce state laws, the Attorney General, was not the person who filed suit. It was done by a state agency named the Justice and Public Safety Cabinet, whose charter covers prisons, public defenders and coroners. The agency does not have charter that covers telecommunications or gambling. It gets more unusual. The agency actually hired an outside, private law firm to file the suit. Now there's a wise use of taxpayer dollars in this economic environment.

The AP quotes Judge Michelle Keller, who wrote the majority opinion, "It stretches credulity to conclude that a series of numbers, or Internet address, can be said to constitute a 'machine or any mechanical or other device ... designed and manufactured primarily for use in connection with gambling,'" So, in other words, an IP address is not a gambling device.

Mr. Owens in his article cites Kentucky Revised Statutes Section 528.010 which defines gambling devices. Gambling devices are defined as those things which, "...when operated may deliver, as the result of the application of an element of chance, any money or property, or by the operation of which a person may become entitled to receive (them)." 1

It is extremely plain that a website address or domain name doesn't even come close to the definition of a gambling device. Mr. Owens also makes very clear the nonsense being attempted by the Governor. He equates the logic of this suit to trying to arrest the house address numbers of a building where gambling occurred.

I think Kentucky better stick to raising horses and making bourbon rather than trying to set unusual legal precedent. But they won't. The Governor's office has already stated its intent to appeal the ruling.

References

1. Owens M. (2008, December/2009, January), All Eyes On Kentucky, CAP Magazine, 51-52.

Fantasy Sports Prognosticators Not So Accurate

2009-01-14T20:47:00.000-08:00

The 2008 NFL regular season is now over, which also means that for the most part the fantasy football season is over. In a previous post, I mentioned that it would be nice to have some measure of accuracy of player projections.

Now this is not by any means determinative, but I took a few fantasy football magazines I had for this year, and compared their QB projected rankings to how they actually turned out. The stats were based on total performance (passing and rushing), not just TDs. The league I was in counted passing TDs for 3 pts instead of 6 pts, so QBs that maybe didn't pass as well but got some stats rushing may show up higher in this list than the rankings your league has. The ranking lists of the magazines also were based on a performance model, not just TDs, to keep the comparison consistent.

To be fair to the magazines, since I used as my sample what I had on hand, I omitted the actual names of the magazines and list them as A, B and C. The table below shows the fantasy QB rankings at the end of this year's regular season, along with the projected rankings from the 3 fantasy football magazines. Also, I averaged the ranking error for the 3 magazines under the "Variance" column.

Where the QB was not included (ranked too low) in a particular magazine's rankings, I insert an "N/A" and assume a ranking of 50. Magazine A had a longer list of QB rankings compared to magazines B and C.

Here's the results (table is at the end of the post):

Correct within 5 or less spots - 10 (31%)
Correct within 10 or less spots - 13 (40%)
Incorrect by 11 or more spots - 19 (59%)
Average ranking error - 15 spots

What is striking is how inaccurate the various fantasy magazines are with their rankings. It is interesting that these magazines, supposedly independent, are very similar with regard to their rankings. They by and large all predict the same performance. So what is the real difference between these various magazines?

On a whim, I wanted to see if the final QB stats ranking for the 2007 season was used, as is, for the 2008 QB stats ranking, how that would measure. For those QBs that ended up ranking too low for measurement in the final 2008 regular season stats, I assumed a ranking of 65. No changes were made to the 2008 projected rankings based on off-season changes. I took the final 2007 regular season rankings verbatim. In other words, Cleo Lemon was projected 25th, Josh McCown was projected 31st, etc. The results are:

Correct within 5 or less spots - 10 (31%)
Correct within 10 or less spots - 15 (46%)
Incorrect by 11 or more spots - 17 (53%)
Average ranking error - 17 spots

Pretty much the same. So, at least compared to the magazines considered, you could have simply taken last year's QB stats rankings as your cheat sheet and likely not done any worse. I didn't do the work, but from a cursory glance, taking the 2007 rankings and simply swapping QBs that took over from the previous year's starter, you likely would have been more accurate than the fantasy football magazines (at least the ones evaluated).

I did not look at the other positions, so it is possible QBs have a greater variation but that would have to be verified and I'll leave that to others to research. As of now, here's some evidence that fantasy football magazine projections (crafted by "experts") are not statistically more accurate than just saying what happened last year would happen this year.

#	QB Name	Mag A	Mag B	Mag C	Variance
1	Drew Brees	5	4	4	3
2	Aaron Rodgers	16	19	19	16
3	Jay Cutler	8	8	8	5
4	Philip Rivers	18	13	13	11
5	Kurt Warner	37	36	36	31
6	Peyton Manning	2	2	2	4
7	Matt Cassel	64	N/A	N/A	48
8	Donovan McNabb	7	6	6	2
9	Tyler Thigpen	N/A	N/A	N/A	41
10	David Garrard	9	15	15	3
11	Chad Pennington	27	30	30	18
12	Tony Romo	4	3	3	9
13	Eli Manning	13	12	12	1
14	Brett Favre	N/A	N/A	45	34
15	Matt Ryan	N/A	34	34	24
16	Jason Campbell	17	25	24	6
17	Kyle Orton	31	38	39	19
18	Joe Flacco	33	37	38	18
19	Ben Roethlisberger	6	7	7	12
20	Jake Delhomme	21	14	14	4
21	Matt Schaub	12	17	17	6
22	Jeff Garcia	22	23	23	1
23	Trent Edwards	24	28	28	4
24	Kerry Collins	50	N/A	N/A	26
25	Shaun Hill	38	40	40	14
26	JaMarcus Russell	26	22	22	3
27	Marc Bulger	15	11	10	15
28	Ryan Fitzpatrick	66	N/A	N/A	27
29	Gus Frerotte	45	N/A	N/A	19
30	Seneca Wallace	53	N/A	N/A	21
31	Derek Anderson	11	10	11	20
32	Dan Orlovsky	N/A	N/A	N/A	18

Question: How Do You Spell Failure? Answer: Montana Sports Action

2008-12-30T07:28:00.000-08:00

The NFL regular season is over, and so is the first NFL season for Montana Sports Action. The weekly handle is shown in the chart above. It doesn't look very pretty. Problems with this game have been discussed in previous posts. You can read those posts here and here.

For the entire season, Montana Sports Action didn't even generate $100,000 in handle. The estimate, based on prize amounts, is approximately $87,510. If you read the hype regarding the revenue potential of this game, it should have been generating $87 thousand per week in wagers. Not even close. The results are so poor, that it is likely that the total amount held back for horse racing, the lottery and the retailers wasn't even enough to offset the costs of the fantasy sports statistics feed. However the cost of the statistics feed can not be covered by the fees to the retailers, or by the fees given to the Board of Horse Racing, so the network operator (Lottery) has to cover an approximate $20,000 charge with their gross revenue of about $5,250.

There is nothing positive with these results. Even the trend is in the wrong direction. If handle was low, but steadily increasing, you could make the claim that the future looks brighter. Not with Montana Sports Action. The trend is downward, with lower handle as the season progressed.

The total revenue amounts to the various entities after paying prizes are approximately:

Montana Board of Horse Racing (MBOHR) - $14,000
Montana Lottery - $5,250
Retailers - $3,500

Assuming 150 retailers, each one generated on average a whopping $23 in commissions - $1.37 per week.

As stated in a previous post, probably only the statistics supplier made money on this game.

On a related topic discussed in a previous post, if this game is truly a lottery game, and not a pari-mutuel game, as the Lottery seems to be moving their positioning toward, why pay MBOHR any money? If the game is a lottery game, that game would be outside the purview of HB 616; therefore no need to pay MBOHR. Quoting Forrest Gump, "stupid is as stupid does."

Keeping with the topic of stupidity, the Montana Lottery is looking to launch a similar game for the NASCAR racing season. Recent research from the Fantasy Sports Trade Association estimated that there were about 4 times as many fantasy NFL participants as fantasy NASCAR participants. Given the poor results of the NFL game, which by far is the most popular fantasy sport, it is fair to estimate that the NASCAR game will generate about 1/4 the handle. Even Forrest Gump would be scratching his head at that.

Given this assumption, and the assumption that the Montana Lottery or their vendor partner isn't bright enough to make sufficient changes to the core game, a similar handle chart is expected. Some initial interest, realization that the game is poor, and a steady gradual decline in handle. Albert Einstein defined insanity as doing the same thing over and over again and expecting different results.

There are rumors of legislation that will be proposed in the new year to put an end to this insanity. Let's see if the Montana Legislature has more sense than the Montana Lottery and the Montana Board of Horse Racing. Time will tell.

Las Vegas Gaming Revenue Still On Downward Trend

2008-12-20T20:14:00.000-08:00

As described in earlier posts, here and here, Nevada and the gambling industry are not recession-proof. The gaming win has been declining, but in October the decline was huge. Really huge. October gaming win in Las Vegas was down 26% from the previous year. Nevada overall was down 22% from a year earlier. The link to the Reuters article is here.

With the housing crisis and higher gasoline prices, people aren't spending their cash heading to Las Vegas. Gas prices have abated a great deal, but the damage to the economy has been done. With the housing crisis not nearly over, and with the US Government printing tons of money to keep the economy going, this is going to get worse before it gets better.

The excessive bailouts will, when the economy stablilizes, spur a large spike in inflation. Too much money after too few goods. We're quite possibly going to do a replay of the late 1970s -- not a good time for the economy, working class and retirees. Everything will get more expensive, but those groups won't be able to adjust their incomes sufficiently to compensate. They are going to get squeezed.

And it is exactly those groups that Las Vegas needs to get back on track. I don't envision that happening anytime soon. Perhaps for a short rebound, but when inflation kicks in, that rebound will vanish. For those economy watchers, keep alert to signs of inflation when the bailout money impacts the economy and the high-water mark of the mortgage crisis occurs, and begins to diminish.

Delaware Looking To Parlay With Sports Betting

2008-12-16T17:07:00.000-08:00

When the Delaware Legislature convenes next month, figuring out something to help their racinos counter increased gambling offerings from Pennsylvania and Maryland will be on their list of "to do" items.

How do you counter gambling? MORE GAMBLING! As Sarah Palin might say, "you didn't see that one coming, you betcha!"

Delaware is one of four states that is grandfathered under the Professional and Amateur Sports Protection Act to legally offer sports gambling. If bigger states offer more slot machines to keep their gambling citizens within state borders, how does a small state like Delaware compete? Offering something Pennsylvania and Maryland can't is probably a good idea. The Forbes.com link to the Associated Press article has more detail on the subject.

The outgoing governor is against the idea, but who cares? She's leaving so who gives a hoot about what she thinks? The incoming governor is facing a revenue shortfall to the tune of about 500 million dollars, and the increased gaming competition from nearby states isn't going to help. He could opt for the Beatles' "Taxman" approach, but that won't be too popular. But adding more gambling? A win-win! (except for the people that lose money gambling) The choice is, do you let those gamblers lose money in someone else's state, or do you want them to lose money in Delaware? If you're Delaware, that's a no brainer.

If Delaware adds sports gambling products that are popular and profitable, Delaware could totally counter what her neighboring states are doing. To those that are scratching their heads, yes, you can offer a sports betting product that loses money. Check out my recent posts regarding Montana Sports Action.

Montana Sports Action: Pie In The Sky From The Big Sky

2008-11-25T05:56:00.001-08:00

Montana Sports Action (MSA), the fantasy sports wagering game instituted by the Montana Lottery, has been in operation for three months. There is enough data to perform some analysis.

MSA allegedly is an attempt to implement a fantasy sports wagering game in accordance with Montana HB 616, which authorized pari-mutuel wagers on fantasy sports. A previous post discussed the potential regulatory issues with MSA.

This new wagering game was predicted to deliver big revenue. During the legislative process in 2007, the Governor's Office of Budget and Program Planning estimated annual wagers of approximately $12 million ($11,985,600 according to the documents). More recently, an article by Online Casino Advisory.com quoted the Montana Lottery Director as expecting "the game to produce between three and five million dollars annually." That may not be the case as published results from the MSA website show.

At the top of the post is a chart showing the amount of wagers per week so far this NFL season for MSA. You are reading it correctly. After 12 weeks, the game that was supposed to generate millions in wagers has barely topped $65 thousand dollars total, with the highest weekly handle a paltry $6,800. You would think that the Montana Lottery and its vendor could figure out how to make a popular GAMBLING game. Obviously not. Don't think that new sports like NASCAR and golf will help these folks either. Fantasy football is the largest of the fantasy sports by a good margin. These other sports are very likely to make LESS than this. Montana Sports Action needs to be renamed More Suckers Anyone.

So, how is this "plethora" of cash broken out? By law, any game that is operated under the authority of HB 616 needs the following revenue split:

74% - Winning Bettors
16% - Montana Board of Horse Racing
6% - Network Operator (Montana Lottery)
4% - Retail Outlets

So, after 12 weeks, $48,753 has gone to the winning bettors, $10,541 to the Montana Board of Horse Racing, $3,953 to the Montana Lottery and $2,635 to the retail outlets. Who is making money? Let's start with the retailers and work our way up.

There are about 150 of the retailers, who had to pay $75 for a license fee to offer Montana Sports Action. In return, they get 4% of the fantasy sports wagers as a commission. To break even on that investment, the retailers will need to sell $1,875 worth of fantasy sports wagers. Assuming each of the retailers sold an equal amount (unlikely), after 2/3 of the NFL season, each one on average has sold only $440. Remember, fantasy football is the most popular of the fantasy sports. Other sports should generate far LESS revenue.

It gets better (if you have a warped sense of humor). Assuming that the betting terminal consumes 150 watts of power, is on for 12 hours a day, and electricity costs 10 cents per kilowatt hour, the terminal will cost the retailer $5.40 per month in electricity. The average retailer earns a whopping $5.84 in MSA commissions. So, each retailer earns enough to cover the electricity costs plus turn a monthly profit of 44 cents. Wow. But remember, that is only if the retailer is performing at the retailer average. Those that are underperforming likely aren't generating enough in MSA betting to even cover the cost of electricity for the betting terminal.

Retailers? NOT making money on Montana Sports Action.

The Montana Lottery is acting as the network operator for the game. So far, they have pulled in just under $4,000 in MSA revenue. To put on the game, they need marketing labor to push the terminals on the retailers, put up the website, etc. But, let's assume all that costs zero. They still need a statistics feed to run the game. Based on the typical rates for these kind of statistics feeds for fantasy sports games, a ballpark assumption is that the cost for fantasy stats for the NFL season would be around $20,000.

Montana Lottery? NOT making money on Montana Sports Action.
Stats Supplier? MAKING money on Montana Sports Action.

The Montana Board of Horse Racing was hoping for this big revenue to keep the horse racing industry alive in the state. To date, they've pulled in approximately $11,250 in retailer license fees and $10,500 in MSA wager revenue, totaling $21,750. Unless jockey insurance drops dramatically and horsemen like race purses around $100, I don't think they are going to get the money they need.

Montana Board of Horse Racing? NOT making money on Montana Sports Action.

So, of all the entities involved in a GAMBLING game, only the stats supplier seems to have a valid profit on Montana Sports Action.

But what if the Montana Lottery's motivation was not really to push the fantasy sports game but really to push lottery ticket sales? We'll examine that possibility in an upcoming post.

With Implementation of UIGEA Regulations, the Government Upholds the Law of Unintended Consequences

2008-11-20T07:12:00.000-08:00

The Kansas City Star queries on their gambling blog if the government actually made internet gambling more likely with the implementation of the Unlawful Internet Gambling and Enforcement Act (UIGEA).

I think that the trend to liberalizing online gambling laws is well in place and that just implementing some regulations won't do much to speed or slow the process. With the economy the way it is, politicians are going to "get religion" and figure anything that can generate more revenue without raising taxes is a good thing. However, I do think that the poorly drafted nature of the legislation coupled with the sleazy way it was passed did help cement the ultimate path of liberalization rather than prohibition.

The Global Gaming Expo trade show was in Las Vegas this week. I attended and saw a smaller show than last year. I definitely noticed a smaller crowd and noticed more than a few empty booth spaces, where exhibitors were scheduled to show, but didn't. A much more somber show than last year's. The press said attendance was down 7%, but to me it seemed a much larger decrease. Last year, lines were long and it was difficult to move from booth to booth. This year, you could move quite easily and not stand in very long lines for anything, if you had to stand in line at all.

At the show, the head of the American Gaming Association opined that legalization of internet gambling will be a hot topic in the next Congress (which will be controlled by Democrats). With a Democrat in the White House, legalization may come sooner rather than later.

If you remember, in the past year or so, several online gambling companies cut deals with the US Department of Justice and paid fines to cover activities before the passing of UIGEA. These companies had departed the US market with that bill becoming law. You know why? Because they want in when the US legalizes online gambling and don't want to be shut out. Those online gambling operators that still service US customers? I think they made a bad bet.

The table is set for the big brick and mortar US gambling firms to move with a passion if internet gambling is legalized, followed quickly by the publicly traded internet gambling firms overseas. A good thing for gamblers as you will be able to work with legit, above board operators. No need worrying about putting money in or getting your money out.

Sports gambling on the internet? Don't count on that portion being legalized soon, but who knows?