Nevada and Delaware Interstate Poker Agreement not Enough

Nevada and Delaware signed on online poker compact last week.  This compact (read: agreement) means that residents of these states can play online poker against each other.  So, online poker operators in both of these states can accept players from either state.  The USA Today story on this agreement can be found here. 

This is a good thing, but it really isn't sufficient to make Nevada or Delaware online poker a big money maker.  Why?  Because the populations of these states are just too small.  Nevada has approximately 2.75 million people and Delaware has approximately 917,000 people.  This is barely 1% of the 316 million people in the USA.  For Nevada and Delaware to really get critical mass, they need to have deals with more states.  I don't see that happening.  If I was a governor of a larger state, I wouldn't necessarily compact with Delaware or Nevada because I won't get as much value from them as they get from me.

If you take the population of Nevada (rank 35 of 50) and add the populations of every state that is smaller, which includes Delaware (rank 45 of 50), you barely break 20 million.  Now 20 million isn't necessarily bad, but you have to have those 15 states working together and agreeing on the deal to get to an aggregate 20 million population.  To put that into perspective, that number is just slightly larger than the population of Florida (rank 4 of 50), which has a population of approximately 19.5 million.

Nevada and Delaware have to somehow get agreements with larger states to feed off of their larger populations before the larger states get wise.  I don't think that will happen.  I foresee something different. I predict that the four largest states will eventually work together and craft a compact just among themselves.  Those states are California (38.3 million), Texas (26.5 million), New York (19.6 million) and Florida (19.5 million).  Add that up and you have approximately 104 million, almost one-third of the entire US population.  THAT is a good number and you only need four states to work together.

Illinois and Pennsylvania are both a bit above 12 million in population, but that is a big drop from over 19 million.  If I were those four states, I would just work together and perhaps add Illinois and Pennsylvania, which would put the total size of the "Big 6" network at just under 130 million.  This is a large enough number that would be sufficient to have a good population of online poker players.  Then, that group could then cut deals with other countries.

With online poker, size DOES matter.  California, Texas, New York and Florida have it - Nevada and Delaware don't.

Delaware's Sports Betting Challenge Fails

The AP reports that Delaware has lost its challenge to the legal ruling that limits them to only offering parlay bets of 3 or more NFL games. Delaware has a grandfather exemption under the 1992 PASPA law, along with Nevada, Oregon and Montana. The exemption allows the grandfathered state to offer only those kind of sports betting options previously offered. Delaware offered a NFL sports lottery back in the 1970s.

Last year, Delaware revived its sports betting offering, but wanted to expand the options to allow single-game sports betting on the NFL as well as other professional sports. The sports leagues objected and filed for an injunction to keep Delaware from expanding their offering. The US 3rd Circuit upheld the leagues' arguments and instituted the injunction on Delaware, which they appealed to the US Supreme Court. The Supreme Court declined to take the case, ending the issue. Delaware will be limited to what they have offered last year.

The State of New Jersey is fighting PASPA on constitutional grounds. Delaware did the same, but did not take the same tack as New Jersey. What Delaware wanted was their ability to expand sports betting without being bound by PASPA, but have all the other non-grandfathered states still be bound by the law - wanting their cake and eating it too. The court saw through this and didn't allow this expansion. If the state wants to operate within PASPA, they need to stay within the stated safe harbors.

New Jersey is fighting to have PASPA declared unconstitutional, which would allow any state to decide for itself what gambling is allowed within state borders. Delaware didn't challenge the entire law, just the portion they didn't like. That approach likely doomed their chances of success. Either they join New Jersey and attack the whole PASPA law, or they need to be satisfied with NFL parlays.

Delaware Lottery Shows Montana Lottery "How It's Done"

Although Delaware is limited to NFL parlays as its sports betting option, they launched their offering for week 1 of the NFL season. The handle wagered wasn't as high as hoped but still a promising number - $257,870. The story from Philly.com is here. They have a ways to go to reach the desired level of better than $1.2 million per week in handle. At current rates, the state will net only approximately $600,000 for the current NFL season. Delaware has recently appealed the recent decision of a panel of the 3rd Circuit and requested the entire 3rd Circuit hear the case. That story can be found here.

Let's compare this sports betting game offered by the Delaware Lottery to what the Montana Lottery is doing with their game, Montana Sports Action. Currently Montana Sports Action has games for racing and football. Where the Delaware game generated over $250,000 in handle, the Montana game generated a pathetic $6,500. How sad. What is sadder is that the geniuses in Montana have been running games for over a year and this is just the first week for Delaware.

If you think that this paltry sum is just a bad week for Montana, think again. This is probably one of their BETTER weeks. You see, when the Legislature was debating the law to allow to allow pari-mutuel fantasy sports wagering, they were estimating that the games would generate about $11.9 million in handle per year, or about $230,000 per week. That's similar to what Delaware did in its first week. Unfortunately, since inception, Montana's sports betting game, Montana Sports Action, has only generated around $190,000 in handle. Talk about lame. Delaware did in its first weekend what Montana hasn't done in over a year. The Legislature's Audit Division just completed an examination of this game, which is posted here.

The people in rural areas often get viewed as "rubes," fairly or unfairly. Using Montana Sports Action as a measure compared to Delaware, the term may have merit, particularly with regard to the Montana Board of Horse Racing, the Montana Lottery, and perhaps even the Governor's office.

MLB, NFL, NBA, NHL and NCAA Sue Delaware to Stop Sports Betting

Yesterday, the major sports leagues (MLB, NFL, NBA, NHL) and the NCAA sued Delaware in an attempt to block the state from offering single-game sports wagers, and keep Delaware limited to offering only parlay sports wagers. The USA Today article has more information on the history and quotes from the various parties as well as a link to the actual pleading.

This blog has previous posts which discuss issues with the Delaware effort, particularly the problems with the government tax structure and the parlay-only offering. Those posts can be found here and here.

The leagues can't stop Delaware from offering parlays, as even the federal law, the Professional and Amateur Sports Protection Act (PASPA), allowed Delaware as one of the four states grandfathered (the others being Nevada, Oregon and Montana) to offer sports betting. Delaware, having offered parlays before, can resume that game whenever they wish. Offering single-game betting is being viewed as an expansion of previously offerings.

From the lawsuit, the leagues claim single-game sports betting in Delaware "would irreparably harm professional and amateur sports by fostering suspicion and skepticism that individual plays and final scores of games may have been influenced by factors other than honest athletic competition." OK...but Nevada's been doing this since like...the 1940s. If any harm would have occurred, wouldn't it have occurred by now?

Besides, the leagues know gambling is an important component to their games' popularity. Why are point spreads published in just about every newspaper in the country, even though sports betting only happens (legally) in Nevada? Why does the NFL publish their injury reports publicly and not just send them confidentially to the various teams? Because they want information in the hands of sports bettors, both legal and illegal.

According to the federal law, the sports leagues have the authority to seek an injunction against operators of sports betting operations - those that aren't grandfathered in. Since Delaware is looking to expand, this might appear to fall outside the grandfathered area. Until now, the leagues have never tried to exercise the law. This is where the situation could get very interesting, and very dangerous for the leagues.

PASPA had some very strong arguments during its deliberation that it is unconstitutional. In essence, the argument was that you can't say 4 states can do something the other 46 can't. Also, since when does the goverment say a private entity has the authority to enforce federal law? States generally have sovereign immunity, so by and large they are immune from being sued unless they allow it. That immunity could be an easy defense. New Jersey has recently challenged the constitutionality of PASPA. A post discussing that case is here, which I recommend reading to learn more of the flaws in this law.

It is in Delaware's interest to keep PASPA in place so that Delaware would have a competitive advantage over neighboring states. It could have sports betting where the others could not. With the New Jersey suit challenging PASPA, Delaware was not likely going to join in as it would not be in its best interest. With the leagues going after Delaware, Delaware will have to fight back. If successful, it will be able to allow single-game sports betting. If unsuccessful, it will only be able to allow parlays.

Here's something very interesting. What if Delaware was too successful in its defense? What if it succeeded in throwing out PASPA? If that happened, every state could offer sports betting if it wanted and Delaware's current advantage would disappear. How Delaware responds to the lawsuit will be telling. They may use the sovereign immunity defense as well as use their constitution saying that a single-game sports bet is basically a one-game parlay. They may not challenge PASPA, or if they do, limit the challenge to the ability of private entities to enforce federal law...not challenge the law in its entirety. Delaware wants the competitive advantage. For that to be maintained, PASPA needs to stay in force.

It will be very interesting to see how this case turns out.

NCAA Not Happy With Montana Sports Wagering?

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.