Gaming and Fantasy Sports Blog: sports betting

Showing posts with label sports betting. Show all posts

Monday, May 26, 2014

Next Volley in New Jersey Sports Betting Fight

NorthJersey.com reports that State Senator Ray Lesniak is preparing a bill to allow the private operation of sports betting at the state's racetracks and casinos. You may think such a bill is already in place and that's what the fight is over. Well, you're correct. But this one will be a bit different.

As part of the legal fight, the US Justice Department is claiming that they are not forbidding New Jersey from sports betting, just that there can't be any state regulation of sports betting. So what the DOJ is saying is that either you can't have any sports betting or if you do, it has to be totally unregulated. Senator Lesniak plans to call the DOJ's bluff. If this passes, unfettered sports betting will be authorized in New Jersey and will force the DOJ to admit they were disingenuous with regard to their previous legal positions before the courts, or that they'll have to shut up and let sports betting move forward in states other than their grandfathered favorites, particularly Nevada.

Now it is possible if the Supreme Court takes up the recent New Jersey challenge, this bill might be held up until that appeal is settled. If the Court doesn't grant review, then I see this bill moving forward quickly to again force a legal showdown with the DOJ

The U.S. Department of Justice is defending the legality of the Professional and Amateur Sports Protection Act of 1992 (PASPA) that bars state-sponsored betting in all but four states. Last week it reiterated its contention that the law is not unconstitutional because it merely prevents the sort of state-sponsored sports betting that New Jersey’s current state law is meant to offer. - See more at: http://www.northjersey.com/news/nj-sen-lesniak-to-craft-sports-betting-bill-for-racetracks-casinos-1.1019252#sthash.0QYM6XkZ.X9hgh8DP.dpuf

Other posts on this topic can be found here, here, and here.

State Sen. Ray Lesniak, D-Union, on Monday announced at the East Coast Gaming Conference in Atlantic City that he is preparing a bill to allow for private operation of sports betting at the state’s racetracks and casinos - threatening to call the bluff of the federal government regarding sports betting, .
Lesniak spearheaded legalization of online gaming in the state as well as its challenge of a federal law now negating the state’s sports betting law. He said he will move forward on the bill in the Legislature should the U.S. Supreme Court decline to hear the state’s case next month.
“Right now, book your hotel room [in Atlantic City]] for the Super Bowl next year and the NCAA Final Four, because you won’t be able to get one,” Lesniak declared. “We are going to have sports betting in New Jersey next year. Go to the bank on it, because if the [Supreme Court takes the case], it will be overturned.
“And if it isn’t, it’s the position of the Justice Department in their briefs that they are not stopping states,” but telling those states they’re free to stop preventing such betting without officially sponsoring it, he added. “I have legislation being drafted, and that will be introduced, to allow casinos and racetracks to have sports betting on our premises. We just won’t be able to regulate it. We pushed the envelope with internet gaming, and we will push the envelope on sports betting. And we are not going to be deterred.”
The U.S. Department of Justice is defending the legality of the Professional and Amateur Sports Protection Act of 1992 (PASPA) that bars state-sponsored betting in all but four states. Last week it reiterated its contention that the law is not unconstitutional because it merely prevents the sort of state-sponsored sports betting that New Jersey’s current state law is meant to offer.
The federal government and the NCAA, the NFL, and three other professional sports leagues last year prevailed at the U.S. District Court and Third Circuit Court of Appeals levels. That has led Governor Christie to make a final appeal for the U.S. Supreme Court to hear the case — a decision that likely would be made next month.
But Lesniak’s bill would keep the issue on the front-burner even if the nation’s highest court declines to hear the case.
At the Third Circuit court in Philadelphia last June, U.S. Attorney Paul Fishman argued the federal government’s case. Fishman, stressing the point that the PASPA law is not an example of prohibited “commandeering” of state conduct, noted that New Jersey officials could, if they chose to, announce that the state would no longer enforce its sports betting laws.
“It would be a really, really bad idea,” Fishman said, but it would not be prohibited by the 1992 sports betting law that allows only Nevada and three other states to offer sports betting.
The Department of Justice’s most recent filing contends that even if the court questioned the federal law’s prohibition against sports betting, that law also prohibits private operators from offering such gambling. The state has countered that if the main provision is not legitimate, the entire law may need to be struck down.
Meanwhile, New Jersey’s somewhat uneven results for online gaming since it was legalized last November was defended by numerous industry experts.
Richard Schuetz, chairman of the Caifornia Gambling Control Commission, said that criticism of the state’s results was like parents complaining that their 5-month-old baby “doesn’t speak any languages.”
Gaming law attorney Jeff Ifrah later continued the theme: “This baby is walking and talking, and is going be doing that very well for the rest of its life.”
Borgata CEO Tom Ballance said that New Jersey’s nine-month journey from legalization to going live with online gaming is “like trying to paint an airplane while it’s flying.”
State Division of Gaming Enforcement Director David Rebuck said: “Internet gaming exists in all 50 states. It’s just unregulated” in 47 of them, with only New Jersey, Nevada and Delaware offering a legal version of the betting.
- See more at: http://www.northjersey.com/news/nj-sen-lesniak-to-craft-sports-betting-bill-for-racetracks-casinos-1.1019252#sthash.0QYM6XkZ.X9hgh8DP.dpuf

tate Sen. Ray Lesniak, D-Union, on Monday announced at the East Coast Gaming Conference in Atlantic City that he is preparing a bill to allow for private operation of sports betting at the state’s racetracks and casinos - threatening to call the bluff of the federal government regarding sports betting, .
Lesniak spearheaded legalization of online gaming in the state as well as its challenge of a federal law now negating the state’s sports betting law. He said he will move forward on the bill in the Legislature should the U.S. Supreme Court decline to hear the state’s case next month.
“Right now, book your hotel room [in Atlantic City]] for the Super Bowl next year and the NCAA Final Four, because you won’t be able to get one,” Lesniak declared. “We are going to have sports betting in New Jersey next year. Go to the bank on it, because if the [Supreme Court takes the case], it will be overturned.
“And if it isn’t, it’s the position of the Justice Department in their briefs that they are not stopping states,” but telling those states they’re free to stop preventing such betting without officially sponsoring it, he added. “I have legislation being drafted, and that will be introduced, to allow casinos and racetracks to have sports betting on our premises. We just won’t be able to regulate it. We pushed the envelope with internet gaming, and we will push the envelope on sports betting. And we are not going to be deterred.”
The U.S. Department of Justice is defending the legality of the Professional and Amateur Sports Protection Act of 1992 (PASPA) that bars state-sponsored betting in all but four states. Last week it reiterated its contention that the law is not unconstitutional because it merely prevents the sort of state-sponsored sports betting that New Jersey’s current state law is meant to offer.
The federal government and the NCAA, the NFL, and three other professional sports leagues last year prevailed at the U.S. District Court and Third Circuit Court of Appeals levels. That has led Governor Christie to make a final appeal for the U.S. Supreme Court to hear the case — a decision that likely would be made next month.
But Lesniak’s bill would keep the issue on the front-burner even if the nation’s highest court declines to hear the case.
At the Third Circuit court in Philadelphia last June, U.S. Attorney Paul Fishman argued the federal government’s case. Fishman, stressing the point that the PASPA law is not an example of prohibited “commandeering” of state conduct, noted that New Jersey officials could, if they chose to, announce that the state would no longer enforce its sports betting laws.
“It would be a really, really bad idea,” Fishman said, but it would not be prohibited by the 1992 sports betting law that allows only Nevada and three other states to offer sports betting.
The Department of Justice’s most recent filing contends that even if the court questioned the federal law’s prohibition against sports betting, that law also prohibits private operators from offering such gambling. The state has countered that if the main provision is not legitimate, the entire law may need to be struck down.
Meanwhile, New Jersey’s somewhat uneven results for online gaming since it was legalized last November was defended by numerous industry experts.
Richard Schuetz, chairman of the Caifornia Gambling Control Commission, said that criticism of the state’s results was like parents complaining that their 5-month-old baby “doesn’t speak any languages.”
Gaming law attorney Jeff Ifrah later continued the theme: “This baby is walking and talking, and is going be doing that very well for the rest of its life.”
Borgata CEO Tom Ballance said that New Jersey’s nine-month journey from legalization to going live with online gaming is “like trying to paint an airplane while it’s flying.”
State Division of Gaming Enforcement Director David Rebuck said: “Internet gaming exists in all 50 states. It’s just unregulated” in 47 of them, with only New Jersey, Nevada and Delaware offering a legal version of the betting.
Email: brennan@northjersey.com Blog: northjersey.com/brennan

- See more at: http://www.northjersey.com/news/nj-sen-lesniak-to-craft-sports-betting-bill-for-racetracks-casinos-1.1019252#sthash.0QYM6XkZ.X9hgh8DP.dpuf

State Sen. Ray Lesniak, D-Union, on Monday announced at the East Coast Gaming Conference in Atlantic City that he is preparing a bill to allow for private operation of sports betting at the state’s racetracks and casinos - See more at: http://www.northjersey.com/news/nj-sen-lesniak-to-craft-sports-betting-bill-for-racetracks-casinos-1.1019252#sthash.0QYM6XkZ.X9hgh8DP.dpuf

Wednesday, March 26, 2014

New Legal Brief Supports New Jersey Sports Betting

The libertarian Cato Institute and the Pacific Legal Foundation have filed an amicus brief in support of New Jersey's appeal to the US Supreme Court over its desire to offer legal sports betting within the state. This is an interesting development as this brief is being done by third parties, with no direct stake in the matter.

It is unknown how much weight this will bear on the case, but for a well-regarded think tank to step into a case like this must be welcomed by pro-sports betting interests.

The story on this development can be found here.

Wednesday, November 27, 2013

New Jersey Taking Sports Betting Fight to US Supreme Court

The Las Vegas Review-Journal reports that Governor Christie of New Jersey is not giving up on the fight to allow sports betting in New Jersey. After the appeals court declined to rehear the case, this is the only option left for New Jersey.

I have provided my views on this several times, where I think New Jersey is in the right in this case. Each state has the ability on their own to decide what kinds of gambling, if any, should exist within their states.

My view is that the Supreme Court will take up this case due to the controversy between federal and state powers, which is the kind of topic the Supreme Court was designed to handle.

Other posts on this topic can be found here, here, here and here.

Wednesday, September 18, 2013

Appeals Court Ruling Against New Jersey Shows Path To Sports Betting

The United States Court of Appeals for the Third Circuit yesterday ruled against New Jersey in its attempt to implement sports betting by a 2-1 decision. The case is now clear for New Jersey to appeal to the US Supreme Court. Although a defeat at this stage, New Jersey can actually see very good news. For the first time, a judge did side with New Jersey and against the US and the sports leagues. The dissenting judge put forward a very well reasoned dissent that picked apart the majority opinion and showed in detail how PASPA was unconstitutional.

New Jersey does have the option of asking for the full Third Circuit to hear the case. The information I received is that it doesn't do much for New Jersey to do that. The first thing is that the full court could side with the majority, which doesn't help. The second thing is that the loser is going to go to the US Supreme Court anyway, so why not go there now and save time and money? That appears to be the path New Jersey will take.

The opponents of sports betting will take this as a great victory - not so fast. From the majority opinion, this sentiment I found interesting:

We are cognizant that certain questions related to this case—whether gambling on sporting events is harmful to the games’ integrity and whether states should be permitted to license and profit from the activity—engender strong views. But we are not asked to judge the wisdom of PASPA or of New Jersey’s law, or of the desirability of the activities they seek to regulate. We speak only to the legality of these measures as a matter of constitutional law. Although this “case is made difficult by [Appellants’] strong arguments” in support of New Jersey’s law as a policy matter, see Gonzales v. Raich, 545 U.S. 1, 9 (2005), our duty is to “say what the law is,” Marbury v. Madison, 1 Cranch 137, 177 (1803). “If two laws conflict with each other, the courts must decide on the operation of each.” Id. New Jersey’s sports wagering law conflicts with PASPA and, under our Constitution, must yield. We will affirm the District Court’s judgment.

So they pretty much put blinders on and crafted an affirming opinion based on a subset of the issues. The court also just used the "rational basis" test and took only a cursory look at PASPA to find anything to say that PASPA was a regulation of interstate commerce, as opposed to Congress using a state as a puppet, which isn't allowed. In other words, if Congress wanted to outlaw the sale of beef jerky, Congress can do that directly, but they cannot tell the states to pass laws to prohibit beef jerky or keep them from passing laws allowing beef jerky, while declining to do so themselves. In the case of PASPA, they allow some states to have sports betting, but not others, which is even more strange. They later in the opinion stated a very odd way of how a state could comply with PASPA:

Thus, under PASPA, on the one hand, a state may repeal its sports wagering ban, a move that will result in the expenditure of no resources or effort by any official. On the other hand, a state may choose to keep a complete ban on sports gambling, but it is left up to each state to decide how much of a law enforcement priority it wants to make of sports gambling, or what the exact contours of the prohibition will be.

We agree that these are not easy choices. And it is perhaps true (although there is no textual or other support for the idea) that Congress may have suspected that most states would choose to keep an actual prohibition on sports gambling on the books, rather than permit that activity to go on unregulated. But the fact that Congress gave the states a hard or tempting choice does not mean that they were given no choice at all, or that the choices are otherwise unconstitutional. See United States v. Martinez-Salazar, 528 U.S. 304, 315 (2000) (“A hard choice is not the same as no choice.”); see also F.E.R.C., 456 U.S. at 766 (upholding a choice between expending state resources to consider federal standards or abandoning field to federal regulation).

What does this mean? The court is saying that New Jersey does not run afoul of PASPA if they ban sports betting or they totally deregulate sports betting. So, in theory, New Jersey could simply allow sports betting with no regulation or oversight whatsoever and the US Government, sports leagues and NCAA couldn't do a thing about it. That logic is insane and was properly called out in the dissenting opinion.

The opening of the dissent is well written and sums up what I believe the essence of New Jersey's appeal to the US Supreme Court will be:

I agree with my colleagues that the Leagues have standing to challenge New Jersey’s Sports Wagering Law, N.J. Stat. Ann. § 5:12A-2, and that the Professional and Amateur Sports Protection Act (“PASPA”), 28 U.S.C. § 3702, does not violate the principle of “equal sovereignty.” I therefore join parts III and IV.C of the majority’s decision in full. I also agree that, ordinarily, Congress has the authority to regulate gambling pursuant to the Commerce Clause, and thus I join part IV.A of the majority opinion as well. Yet, PASPA is no ordinary federal statute that directly regulates interstate commerce or activities substantially affecting such commerce. Instead, PASPA prohibits states from authorizing sports gambling and thereby directs how states must treat such activity. Indeed, according to my colleagues, PASPA essentially gives the states the choice of allowing totally unregulated betting on sporting events or prohibiting all such gambling. Because this congressional directive violates the principles of federalism as articulated by the Supreme Court in United States v. New York, 505 U.S. 142 (1992), and Printz v. United States, 521 U.S. 898 (1997), I respectfully dissent from that part of the majority’s opinion that upholds PASPA as a constitutional exercise of congressional authority.

This case isn't over and it is my view that the Supreme Court will take it up. How it turns out is a matter of debate, but my view is that New Jersey should prevail. It should be noted that a recent statistic indicated that 60% of the rulings from the Third Circuit Court of Appeals are reversed by the Supreme Court. I think yesterday's ruling overall wasn't too bad at all for New Jersey and those wanting expanded legal sports betting in the USA.

Tuesday, September 10, 2013

New Jersey Governor Optimistic In Sports Betting Legal Case

Cardplayer.com is reporting that New Jersey Governor Christie is just as confident as ever about his state's prospects in ultimately being allowed to offer bona fide sports wagering. “I think New Jersey is going to be victorious ultimately,” Christie said Monday on the “Boomer and Carton in the Morning” show in New York, according to The Washington Times. "There is no reason why Las Vegas, the state of Nevada, should have a monopoly on sports gambling.”

The case is still winding its way through the courts and will likely end up at the US Supreme Court before finally being settled. Given that, even if successful, don't expect sports betting in New Jersey for a couple of years.

Thursday, August 29, 2013

New Jersey Casinos Not Yet Offering Fantasy Sports Contests

Although New Jersey published regulations authorizing pay-to-play fantasy sports contests back in March, not one Atlantic City casino has of yet moved forward with an offering. The reasons for this are discussed in the story, which can be found here. The were two primary reasons discussed detailing why no fantasy games are yet offered. One is that the casinos didn't see a successful path forward competing with larger, national entities such as ESPN. The other is that this is summer and allegedly sports betting only revolves around the NCAA basketball tournament and the Super Bowl.

I'll quibble with both of these reasons, but first I do need to quibble with the article ever equating the concept of fantasy sports contests and betting. Playing fantasy sports games is not betting. Fantasy sports games are a game of skill and by legal definition not gambling, provided the games, gameplay and prize structures fit within the statutory safe harbors. It is just journalistic laziness to refer to such contests as betting.

With regard to the reason that the casinos don't see an easy path to compete with a similar game to the ESPNs of the world, valid point. The key is to find a fantasy sports game that would be attractive to players that the ESPNs of the world can't emulate. Does such a fantasy sports game of that nature exist? Yes. We will discuss that later. Not having a compelling game to draw patrons that would provide sufficient direct and indirect revenue to offset the cost of offering is a very valid point. In my view, none of the existing fantasy games that have been considered have the hope of meeting that hurdle.

The reason for that varies on the type of game. For the league-based season-long contests, the contests are just too long and the casinos rightly have figured out that they may be able to draw customers a few times during the year, but not on a weekly basis for an extended period. For the short-term contests, the prize structures are such that the gross margins of these games are just too thin to satisfy the profit needs of the game operator and the casino.

Regarding the reason that the casinos aren't offering the games because this is summertime and there's no interest in sports contests for money is a crock. Fantasy baseball is going on now and it is indeed quite popular and indeed people are playing for money.

So what kind of fantasy sports contest would have a hope of being viable for Atlantic City casinos? Again, it would have to be something that would be attractive to fantasy sports players and perhaps even sports bettors (even though sports betting is not yet legal in New Jersey). By attractive, that means a game that has a good prize to entry fee ratio (odds if we were talking about betting). Also, attractive means that the margin of the games would be sufficient to satisfy the needs of the game operator and the casino with regard to profit. No sense offering a game that costs more to offer than revenue generated, right? The final nuance of attractive would be a fantasy game that offered some level of exclusivity, something the current large fantasy sports operators can't match.

Is there such a fantasy sport game available that can do this? Yes. YouGaming's pari-mutuel fantasy sports game is such a game. Here's why:

First, the pari-mutuel fantasy sports game concept is protected by no less than 3 US Patents. That takes care of the exclusivity element.

Second, the games can have gross margins that will satisfy the profit needs of the casinos and game operator. For typical "daily" fantasy sports games, gross margins may vary from 5% to 10%. Given the costs of operation, it will be practically impossible to have profitable games. The pari-mutuel fantasy sports games can easily have gross margins in the 20% to 30% range, and can be offered in the "daily" format. Now if you compare that to the theoretical margin on a straight sports bet, which is 4.54%, this advantage is substantial.

Third, the pari-mutuel fantasy sports games can also offer games with high gross margins while offering superior prize to entry fee ratios (odds if we were talking betting), allowing the game operator and casino to meet their profit objectives.

So given a game where one out of every five entries can win a prize, where the top prize is 100 times the entry fee, the gross margin of such a game is greater than 20%, and having a level of exclusivity for the casino(s) that offer it, one can see that this kind of game would have a level of attractiveness to Atlantic City properties.

Also, this kind of game would be attractive to offer in an online format to the casino(s)' customers. Unlike some of the free play casino games used as a marketing tool, this game format can be offered online in a pay-to-play format, generating revenue and awarding cash prizes. This offering of course done in a branded format. The casino will be able to extend its brick and mortar presence with a revenue-generating game.

There is another potential advantage to such a game, but it will have to wait until New Jersey is officially allowed to offer sports wagering. Such a game can also be offered in a wagering game format, which current fantasy sports games will have great difficulty doing, and even if they did, would not result in a superior wagering game to conventional sports betting.

Sunday, May 12, 2013

Other States File Legal Briefs in Support of New Jersey Sports Betting

The briefs regarding the appeal of the recent New Jersey sports betting court ruling are continuing to flow in. NorthJersey.com reports that the attorney generals in four states, Virginia, West Virginia, Georgia and Kansas, filed amicus briefs in support of New Jersey's efforts to offer sports betting within the state. The briefs were specific to mention that they did not take a position regarding the sports betting laws under dispute but attacked the US Government position and District Court opinion on sovereignty grounds.

This is an interesting argument. It appears that this was studied beforehand and coordinated. Obviously, these states think they have a very good argument on this point and don't want to cloud the issue with details specific to sports betting.

Their point was that by having Congress pick and choose what states can do what, it tramples on the sovereignty of the states. More than that, the briefs attack the premise of the District Court judge that upheld the sports betting ban (which allow some states to offer sports betting but not others) due to the fact that Congress merely prohibited the states from performing an affirmative action in allowing sports betting. The four states view this legal position as an error as this court ruling will allow Congress to infringe on state sovereignty by using the tactic of preventing states from performing actions like licensing and permitting as a means of control - an indirect method of federal control over state activity.

The blog puts forward a simple example regarding fishing licenses. I am sure when the case is heard by the Court of Appeals, there will be better examples ready by the states. Again, what I find interesting is that the states are very much avoiding the issue of sports betting. They must feel the issue of federal vs. state sovereignty is quite strong and that the federal side will have difficulty countering. The Court of Appeals will now more likely take this case under even more consideration as it is not now just a single state (New Jersey) wanting sports betting. The court will need to decide a larger constitutional issue and if this argument is sufficient, the sports betting ban will have to fall as a natural consequence.

My view is that when this case is ultimately decided by the Supreme Court (the loser here will no doubt appeal), there will be constraints on Congress' actions that will ultimately allow each state to decide for themselves if they desire sports betting. Nevada's sports betting monopoly days are likely coming to an end.

Saturday, April 20, 2013

Nevada Making Preemptive Move to Solidify Sports Betting Competitive Advantage

Nevada Senate Bill 346 is moving through the initial legislative processes. What this bill will allow is for the expansion of sports betting in that groups of people could form an entity and bet as a group. Currently, only individuals can make sports bets in Nevada.

According to the AP story, the bill sponsor, Senator Greg Brower, a Republican, explained that the bill would add entities could be formed and authorized to make sports bets. The groups could act as a type of hedge fund and wager big dollars on football, basketball, baseball and other sports. In turn, they could seek out investors to put up money and allow an expert to make the bet.

This expansion of sports betting would further distance Nevada from other gaming states and could bring some of the estimated $380 billion per year wagered illegally on sports into the open, where it can be regulated and taxed, which in addition to assisting the Nevada gaming industry, is of keen interest to State of Nevada. If this bill does pass, gaming industry estimates sports betting handle would triple to $10 billion per year within 5 years.

The bill hasn't yet moved past the committee, so this is still in its infancy, but stay tuned.

Sunday, March 10, 2013

New Jersey Sports Betting Loses in District Court

Although not totally unexpected, a Federal judge ruled against the State of New Jersey with regard to its challenge to the constitutionality of the Professional and Amateur Sports Protection Act (PASPA). So, with this ruling, New Jersey can not proceed with implementing sports betting. As it stands, sports betting is still allowed in just four states: Nevada, Delaware, Oregon and Montana.

Don't expect New Jersey to quit - an appeal to the US Court of Appeals for the Third Circuit is almost a given. Whoever loses there will almost certainly appeal to the US Supreme Court. This is a multi-round fight, but the first round goes to the NCAA and sports leagues.

Read more about this issue here.

Saturday, December 29, 2012

Sports Gambling Panel Discussion Highlights Different Perspectives

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

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

Friday, December 7, 2012

New Jersey Sports Betting Lawsuit Update

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

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

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

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

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

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

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

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

Sunday, October 28, 2012

Sports Betting Ring Arrested

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

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

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

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

Tuesday, October 16, 2012

New Jersey Moving Ahead with Sports Betting

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

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

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

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

Tuesday, September 25, 2012

Seattle / Green Bay Disaster - Incompetence or Worse?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Sunday, August 19, 2012

Assembly Committee Shelves Sports Betting Bill

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

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

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

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

Saturday, August 11, 2012

California Sports Betting Bill Update

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

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

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

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

Saturday, July 14, 2012

Poll Finds Californians In Favor of Sports Betting

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

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

Group / Favor / Oppose / No Opinion

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

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

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

All                58/35/7

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

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

The details on the poll results can be found here.

Saturday, June 9, 2012

You Can Bet on Sports Where?

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

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

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

Saturday, May 26, 2012

California Sports Betting Bill Moves Forward

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

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

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

Saturday, March 17, 2012

Australian Betting Operator Argues For More Regulation To Level Playing Field

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

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

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

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

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

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

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

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

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