Breaking Down The Federal Sports Betting Bill Discussion Draft: Part 2

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Yesterday we looked at a number of key portions of the federal sports betting draft bill circulating in Congress.

It is a discussion draft format that will likely be revised and redrafted numerous times before it ever gets passed, if it ever passes. Both the Wire Act and the Unlawful Internet Gambling Enforcement Act took years before they passed.

The following are some of the key portions and points I think are likely to be important as the discussion over the federal government’s role is discussed moving forward. Here is Part 2 of my insight:

Section 104 — Anti-Money Laundering Provisions

This section largely incorporates existing federal laws relevant to sports betting and establishes clearly that sports betting operators have obligations under state legislation, such as the Bank Secrecy Act.

This is an important clarification, but something books in casinos and most reputable shops were already aware of.

Section 105 — Interstate Sports Wagering Compacts

The proposal in this section is to establish interstate agreements that would allow for multi-state wagering, in what appears to be a structure similar to that used in horse racing.

My interpretation is that a person in a state that is part of a compact that has been approved by the Attorney General could wager at an out-of-state bookmaker, provided that both states were parties to an interstate wagering compact.

This might well be a big victory for mid-sized sportsbook operators and citizens of smaller states.

Section 106 – National Sports Wagering Clearinghouse

The National Sports Wagering Clearinghouse is a nonprofit organization, independent of any other entity and is tasked with:

  • Operating a national center for sports wagering integrity;
  • Coordinating public and private programs regarding sports betting integrity;
  • Disseminating research about best practices;
  • Managing the national database of anonymized sports wagering data;
  • Receiving suspicious transaction reports;
  • Maintaining the national self-exclusion list and a variety of other important functions.

The organization would also provide assistance to federal and state authorities relating to sports integrity violations. This is a meaningful improvement over the existing integrity monitoring entities that lack any real investigative authority and appear beholden to their funders.

Title II — Wagering Trust Fund

The wagering trust fund would tax the revenue from the current federal sports wagering excise tax of .25 percent and dedicate it to the enforcement of federal law relating to sports wagering and programs for treatment.

These are two things that most agree need to happen. The wagering trust fund would also fund the National Sports Wagering Commission and monitor national trends related to gambling addiction.

Title III — Wire Act and Sports Bribery Act Amendments

The comprehensive sports wagering bill also adds some clarity to one of the questions regarding the Wire Act.

It clarifies issues regarding whether intermediate routing would violate the statute, stating:

“the intermediate routing of electronic data shall not determine the location or locations in which a bet or wager, or information assisting in the placing of a bet or wager, is initiated, received, or otherwise made.”

The statute would also add language specifically referencing layoff bets. The Wire Act would also be expanded to enable states greater power under the statute and grant states the ability to bring civil actions.

Section 302 — Sports Bribery Act Improvements

The proposed bill would also provide a significant modernization of the Sports Bribery Act. The statute would be amended to incorporate extortion and blackmail, and establish bans on the use of non-public information.

The statute also creates whistleblower protections, changing the incentives to come forward with information about match fixing. This would be a tremendous victory and appears to be largely based on recommendations from a 2015 law review article.

Title IV – Gambling Addiction Prevention and Treatment

This section of the proposed legislation would establish an advisory committee, under the Secretary of Health and Human Services, to oversee a gambling addiction research committee and track gambling addiction.

This is an important step forward; indeed this suggestion is not new. Professor Marc Edelman, as well as others, has articulated the need for increased monitoring of problem gambling at various hearings relating to daily fantasy sports and gambling.

Quick takeaways

This bill is not likely to make any group happy. In many ways that is probably a good thing.

The bill has some very noticeable issues; the mandate of official data is problematic even with a seemingly arbitrary sunset clause. The odds of a federal bill passing are low and this bill will certainly be marked up many times before it ever gets a vote, if it gets a vote, but this bill does have some positives.

The big winners with this bill are those who would like to see increased federal engagement and those who want to see more federal action on problem gambling.

The post Breaking Down The Federal Sports Betting Bill Discussion Draft: Part 2 appeared first on Legal Sports Report.

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The Week In Sports Betting: All Eyes On DC, Congress

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The nation’s capital was the focus of the US sports betting industry this week, via bills both at the federal and city level.

But there was also a lot of buzz around the country as legislatures prepare to address legal sports gambling in 2019.

Here’s a roundup of what went down around in the sports gambling industry this week:

DC sports betting

A long-promised sports betting bill surfaced this week in Congress from Sen. Orrin Hatch, although it was only a draft and not officially introduced.

Deep dive on the bills here and here from our John Holden.

The most problematic part of the bill would be the mechanism where state sports gambling laws have to be approved by the US Attorney General; this probably won’t be very popular with states’ rights advocates.

The smart money says the draft bill exists to appease lobbyists and will be going nowhere in the short term. But still, there’s been some amount of interest from a least a handful of lawmakers on the subject.

Anyway, a bill getting passed during the current session of Congress and before Hatch retires seems like a huge underdog right now.

And more DC sports betting

The other big movement in Washington DC came via the city council, which has been looking at legislation this fall.

Right now, it looks as if the DC Lottery is leaning toward using a single operator to run its sports betting operation (if a city bill passes).

That’s something Major League Baseball, the NBA, MGM Resorts, DraftKings and FanDuel want to avoid, and it was the impetus for all of them banding together to lobby in DC. Politics makes strange bedfellows.

Anyway, DC sports betting could be coming, and in an uncertain form. The details should come into focus in the coming weeks.

The rest of the sports betting world

  • New York sports betting is going to get a serious look in 2018, but it’s still anyone’s guess if it will reach the finish line. Interview with Assemblymember Gary Pretlow here.
  • Lots of interesting details about discussions in Colorado.
  • The buzz in South Dakota continues to grow.
  • Confusion reigns in the story about a possible ban on ads during matches in the UK.
  • MGM wants to partner with tribal casinos on sports betting.
  • Sports betting is coming to Hard Rock Atlantic City.
  • The newest sports betting poll: People still like to bet on sports.
  • An interview with the head of a new US sports betting integrity group.

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Breaking Down The Federal Sports Betting Bill Discussion Draft: Part 1

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We are now more than six months past the day the Supreme Court struck down the Professional and Amateur Sports Protection Act (PASPA) of 1992. Shortly after the fall of PASPA, there were rumblings that the federal government was interested in legislating in the sports betting area.

There is currently a bill circulating in a discussion draft format that will likely be revised and redrafted numerous times before it ever gets passed, if it ever passes. Both the Wire Act and the Unlawful Internet Gambling Enforcement Act took years before they passed.

The following are some of the key portions and points I think are likely to be important as the discussion over the federal government’s role is discussed moving forward. Here is Part 1 of my insight:

The Findings Section

The proposed bill contains a number of “findings”. This section is used to lay out Congress’ reasons for passing the bill, and will be examined to determine the intent of legislators should a bill’s content be called into question by a court. Importantly, the draft document states:

“While each State may decide whether to permit sports wagering and how to regulate sports wagering, there is an important role for Congress in setting minimum standards for sports wagering that affects interstate commerce and providing law enforcement with additional authority to target the illegal sports wagering market and bad actors in the growing legal sports wagering market.”

This section effectively means that Congress intends to use the power of the commerce clause (the same constitutional device used to enact PASPA) to regulate minimum standards for sports betting.

As Justice Clarence Thomas articulated in the Murphy v. NCAA decision, and I have suggested separately, it is perhaps possible to construct sports betting that does not impact interstate commerce. But the language here does not appear to presuppose that betting is interstate commerce.

Instead, the legislation only applies to wagering that affects interstate commerce. This will still impact most betting legislation.

The Definitions Section

This section of legislation is normally pretty mundane, unless there is a dispute over whether an activity is incorporated. There are a few items worth noting in the draft legislation, with the first being a definition for the Interstate Sports Wagering Compact and National Sports Wagering Clearinghouse, which are two terms that are new and do not appear elsewhere in any other Federal legislation.

This section also defines sports wager as:

  • IN GENERAL.—Except as provided in subparagraph (C), the term “sports wager” means the staking or risking by any person of something of value upon the outcome of a sporting event, including the outcome of any portion or aspect thereof, upon an agreement or understanding that the person or another person will receive something of value in the event of a certain outcome.
  • —With respect to an amateur or professional sporting event, the term 36 “sports wager” includes—
  • a straight bet;
  • a teaser;
  • a variation of a teaser;
  • a parlay;
  • a total or over-under;
  • a moneyline;
  • a betting pool;
  • exchange wagering;
  • in-game wagering, including in-game wagering on—
  • a final or interim game score;
  • statistics; or
  • a discrete in-game event;
  • a sports lottery; and
  • a proposition bet

While inclusion of these definitions is meaningful, it is the inclusion of exchange wagering here that is potentially impactful, as exchange-based wagering in particular is an activity that rides the fence between financial regulations and gambling.

While the definitions section is interesting, it is what is missing that catches my attention. There is no definition of sport. This is potentially significant for esports, as it is not immediately clear if this legislation impacts esports betting.

Title I – Sports Wagering

The first substantive section of the legislation is titled Sports Wagering and creates a federal civil prohibition on anyone accepting a sports wager.

That is not insignificant. The statute excepts transactions that are lawful under state law, including social gambling laws. This section contains no criminal penalties as drafted, only civil penalties up to the greater of $10,000 or three times the amount of the applicable sports wager.

Section 102 – State Sports Wagering Program

States seeking to offer a sports wagering scheme would be required to submit an application to the Attorney General showing:

(A) a full and complete description of the State sports wagering program the State proposes to administer under State law, including—

(i) each applicable State law relating to sports wagering; and

(ii) an identification of the State regulatory entity; and

(B) an assurance from the Attorney General or chief legal officer of the State that the laws of the State provide adequate authority to carry out the proposed State sports wagering program.

The key hangup that might potentially arise would be if the Attorney General denies an application. The federal government appears to be attempting to do what it did not do under PASPA: create a federal regulatory body capable of overseeing sports wagering.

There are likely questions that will arise regarding to what extent the federal government can get states to come on board, without commandeering the states as occurred under PASPA. With that said, the federal government sets minimum standards in a variety of other areas (e.g. environmental standards.) It is possible that a court could find this system analogous and thereby allowable.

Section 103 – State Sports Wagering Program Standards

This section of the legislation lays out some minimums, including the requirements of mandated location verification if a state offers internet wagering, as well as bans on wagers on certain amateur events. The bill also proposes a requirement that there be a mechanism to request restricting wagers, something that is presently available in Nevada.

This section further provides for a standard for:

  1. A minimum age for sports bettors – though the section does not directly establish one
  2. A national self-exclusion list
  • A ban on athletes, coach, referee, or employee of a sports organization placing wagers on games from their sports organization
  1. A similar ban on employees of players or referee unions

Data requirements important to the sports betting draft

This section also contains the official data requirements. This requirement is almost certain to create litigation if it were to remain, but there is a sunset clause which would only require use of official data only until December 31, 2022.

This type of inclusion might be the result of some concession to sports leagues, but still raises questions about whether Congress has the power to mandate and grant preference to one sort of data over others, while seemingly recognizing viable alternatives.

The proposed bill requires books to meet certain reserve requirements and avoid targeting individuals with problem gambling tendencies or those below the legal age to wager.

Trouble for DFS companies?

One aspect of the bill likely to be overlooked is contained on page 14. It appears that both FanDuel and DraftKings may be deemed unsuitable for a license under the proposed legislation as they have operated in Texas, despite the determination that DFS is a form of illegal gambling.

There are also potential issues given the offering of single-event DFS contests. Those in violation of the provision below would be deemed unsuitable for a license under the federal scheme:

(v) on or after October 13, 2006—

(I) has knowingly participated in, or should have known the prospective sports wagering operator was participating in, an illegal internet gambling activity, including—

(aa) taking an illegal internet wager;

(bb) payment of winnings on an illegal internet wager;

(cc) promotion through advertising of an illegal internet gambling website or service; or

(dd) collection of any payment on behalf of an entity operating an illegal internet gambling website; or

(II) has knowingly been owned, operated, managed, or employed by, or should have known the prospective sports wagering operator was owned, operated, managed, or employed by, any person who was knowingly participating in, or should have known the person was participating in, an illegal internet gambling activity, including an activity described in items (aa) through (dd) of subclause (I).

This section contains a number of best practices-type requirements and supplements requirements, such as financial reporting and reporting of suspicious transaction mandates, as well as establishes monitoring, enforcement, and sharing of real-time data requirements.

The bill also appears to put some teeth behind sports protection, requiring cooperation by sportsbook operators and state regulators. However, it seems to miss a key component of protecting sport integrity, as it does not include a mandate that sports organizations cooperate similarly.

In Part 2 …

We’ll pick up tomorrow with anti-money laundering provisions and a few other key sections of the bill.

The post Breaking Down The Federal Sports Betting Bill Discussion Draft: Part 1 appeared first on Legal Sports Report.

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Irish Company Claims Intellectual Property Rights Over Sports Betting Cash Out Option

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Dublin-based Marketmaker Software Ltd. claims that its cash out patents cover the popular sports betting option that allows bettors to exit a bet before the result is known.

The claim could affect a number of apps in New Jersey sports betting including DraftKings Sportsbook, FanDuel Sportsbook, and Betstars. These apps feature the functionality which Marketmaker claims to own.

How does cash out work?

The cash out option gives bettors a choice to lock in gains or cut losses on a particular bet.

During a game, the odds of a team winning or losing change with the flow of play. A bet on the favorite that looked good pre-game may suddenly look at-risk if the opposing team makes an early score.

In this case, a bettor might throw up his or her hands, and opt to cash out. The amount the operator pays out depends on the new odds of whether the original favorite will win.

The option to cash out of bets early is growing in popularity. Marketmaker states that:

“Regarded as a key revenue and retention driver for in play sports betting worldwide, cash out currently comprises approximately 65 percent of global in play sports betting liquidity. For the US regulated market, cash-out numbers are already at 20 percent of gross revenue for some NJ based providers.”

What do patents have to do with cash out?

Marketmaker owns two patents that it claims cover the cash-out option. Both were filed in 2007:

  • US10115157B2: Exchange for derivative products contingent on odds-based markets.
  • US8510205B2: Exchange for derivative products contingent on odds-based markets.

While the titles and abstract for each are the same, they cover different processes.

The company explains:

“The 2007 filed patents in Marketmaker’s portfolio cover activities related to making ‘one or more, optional divestment bet offers’ … ‘prior to the outcome of a sporting event’ in a ‘user interface identical to that which would be currently available in odds markets’ so as to ‘avoid exposure to the outcome of a sporting event’.”

In other words, Marketmaker says it owns the IP that covers cashing out of bets early.

The US patent system is different

For many years, patents only applied to physical inventions. The US Patent and Trademark Office (USPTO) held that a business method was not patentable.

This rule changed in the two decades ago when the USPTO decided that it was “no longer practical to determine if a particular computer-implemented invention was a technological invention or a business invention.”

After this decision, all the inventor had to prove was that the invention must be:

  • Statutory (subject matter eligible)
  • New
  • Useful
  • Non-obvious

The door was now open to business-method patents implemented on computer systems.

The European standard

In Europe and the rest of the world, slightly different standards apply. The differences might be small, but they mean Marketmaker’s patent could be more enforceable in the US.

Marketmaker states:

“European operators and software providers are coming to realize that the US legal and regulatory environment has certain key differences. Of which, a principle concern is the different treatment of software, user experience, IP and patents. The US carries significant Federal protection for IP and Patents under US law. The cash-out patent grant to Marketmaker Software Ltd., effective until 2029  is the most current high-profile example of how US federal law and patent protection differs from the European environment.”

Patent troll or potential partner?

In 2007, Marketmaker backed the foundation of Oddsfutures exchange.

Oddsfutures’s strategy was to offer sports bettors unique pricing and proprietary features, such as the cash-out option. The company ceased to trade in 2013, beaten by the competitive pressures of the sports betting market.

But there was an honest attempt to use the innovations they patented to build their own business. Patent trolls sit on their IP until they can use it to gain payment from legitimate businesses.

Marketmaker is keen to establish its moral credentials in this space:

“We had a long-term vision as to the value of innovative features and experience, and our drive to own our own IP has been no different to the approach taken by well-known US market leaders and software suppliers that have protected their work by applying for patent protection.”

Nevertheless, Marketmaker is providing an early warning that it plans to defend its intellectual property rights:

“Not owning the ‘Cash Out’ IP, which is protected under US Federal Law, whilst providing a 3rd party ‘Cash Out’ services may put technology providers in breach of contract indemnity warranties with Casino Partners, b2b customers and Operators.”

Marketmaker seeking US partnerships

Marketmaker says that is has kept a “low profile” because until now there has been “so much noise in the new, regulated US space.”

They are coming out of the dark with a plan:

“… to work with a partner group of US-facing operators and software providers that plan to maximise the regulated market opportunity by licensing cash out from us.”

Marc Butterly, director of Marketmaker, told LSR:

“We have kicked off early-stage talks with a number of the most interesting companies in the space and hope to announce a marquee partner soon. We believe that any company that can announce that they are the first company to legally offer cash out IP to US players will have significant competitive advantage.”

Next stage for Marketmaker

On the short-term horizon, Marketmaker expects to receive a third patent grant within a few weeks.

The new patent is for a “graphical-user-interface utility (GUI) patent on a method for sports betting Cash Out.”

The new patent could solidify Marketmaker’s claims to the cash-out process. Butterly explained that the company is now working closely with leading patent attorney firm Finnegan:

“We’ve always made sure to work with the best possible advisors and having counsel as accomplished as Erika Arner of Finnegan onboard, is a critical factor in our IP protection success. The work that Finnegan are doing builds on their previous experience at the PTAB against Betfair, in the Supreme Court with Bilski and in the federal courts with the Trading Technologies cases.”

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Single-Operator Plan Wins First Round With Council In DC Sports Betting Discussion

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Washington, D.C., sports betting bill cleared another significant hurdle on Tuesday as councilmembers progressed it with a few changes.

Introduced by Ward 2 Councilmember Jack Evans, the Sports Wagering Lottery Amendment Act of 2018 passed by a 10-2 vote.

The bill is scheduled for its second reading in two weeks.

No switch to multiple operators

The bill, B22-0944, passed despite efforts from Councilmember Robert White to alter the number of licensed operators.

The highly debated amendment to the D.C. sports betting bill, which failed on a 7-5 vote, would have permitted five sports betting licenses instead of the single-operator model favoring the lottery proposed by Evans. Evans’ ties to the lottery are under scrutiny.

White’s amendment also would have required that at least 35 percent of the net profits of sports betting licenses in the district go to minority women and locally owned businesses (CBE). According to White, it also would have created five operator licenses for mobile sports betting, reserving one for a joint venture with a CBE, where a CBE has a majority interest.

Lottery gets preference in D.C. sports betting bill

According to Evans, the district would benefit from a single operator like the lottery, rather than multiple operators.

Just recently, Intralot, a Greek gaming company that serves as the lottery supplier in DC, told stakeholders it could produce revenue up to 30 times greater than a traditional open model. Those claims appear dubious.

Evans plans to leave language in the D.C. sports betting bill allowing a switch to multiple operators if the single format does not prove as lucrative.

Chairman Phil Mendelson urged council members not to vote for the amendment.

More from Mendelson:

“I would urge members not to vote for this amendment. We are going to revisit this again on second reading. There are two fundamental issues with this amendment and the one that’s being spoken about over and over is the emphasis on CBE’s. …

The other piece — going from one mobile app that goes through the lottery or having the private sector with up to five mobile apps. It sounds great to do a private market, but the CFO was very clear. That (model) would not be a benefit as those lobbyists have argued.”

The NBA, MLB and PGA Tour, along with MGM Resorts, DraftKings and FanDuel have formed an “alliance” to pitch for a private market featuring a version of the integrity fee.

“The way the bill is written, if it looks like the single app isn’t working, we can convert to the five. But we can’t do it the other way around. If we commit now to five (operators) we won’t be able to put that genie back in the bottle,” Mendelson said.

Only four sports venues approved for betting

The bill passed with an additional amendment added to it courtesy of Ward 6 Councilmember Charles Allen.

Allen’s amendment removes RFK Stadium from the list of major sports venues slated to have onsite sportsbooks. Though viewed by some as a minor provision, eliminating RFK could have significant implications in the future.

According to Allen, since sports betting would be illegal on federal land, it is not necessary to include RFK Stadium.

While the stadium, located a few miles from the nation’s capital, is no longer home to any major sports teams, there have been talks about renovations and upgrades to the property.

A major component of Evans’ bill was a sportsbook located inside five major venues:

  • Capital One Arena
  • FedEx Field
  • Audi Field
  • Nationals Park
  • RFK Stadium

Ultimately, Allen’s amendment passed by a 7-5 vote.

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New York Sports Betting Will Be Too Big To Ignore In 2019, Assemblyman Says

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When there’s an 800-pound gorilla in the room, people tend to take notice. Assemblyman Gary Pretlow called New York sports betting that “800-pound gorilla” that the state legislature isn’t going to be able to ignore in 2019.

“New Jersey is doing even better than expected with sports betting because they’re getting all that New York action, which is what I said would happen and it’s happening,” Pretlow said. “I read in New Jersey they brought in $24 million from sports betting in September, which is huge.”

For years, Pretlow’s colleagues have heard his arguments regarding the need to authorize and regulate online poker and sports betting, and responded that there already was too much gambling.

Now that they’ve seen the money generated in New Jersey sports betting — which he expects would translate to a minimum of $150 million annually in New York — Pretlow is 90 percent certain that sports betting receives legislative approval next year.

New bill, same as the old bill

Pretlow stated that he will reintroduce his sports betting bill in January, and that he doesn’t plan to make any changes from the bill as it was written at the end of last session.

This would mean professional sports leagues still have a shot at making their coveted integrity fee a thing via New York sports betting. The previous bill had a 0.2 percent royalty from each wager made going to the relevant sports league and a tax rate of 8.5 percent.

The bill would authorize mobile sports betting, and sports betting at the state’s brick-and-mortar tribal casinos and racetracks. Sports betting at the state’s four commercial casinos was authorized in a ballot initiative in 2013, but the New York State Gaming Commission has yet to issue regulations for them to proceed.

“I’m not considering any changes, but I don’t know the feeling of my new counterpart in the Senate, so I don’t know what they might want to add, subtract or change,” Pretlow said.

Sen. John Bonacic is retiring from the legislature, leaving a vacancy for chair of the Senate Racing, Gaming and Wagering Committee. It is not yet known who will take his place, but it will be a Democrat as the Senate flipped parties. Pretlow does expect to return as chair of the Assembly Racing and Wagering Committee.

“Unless the Speaker has other plans for me, I will still be chair,” Pretlow said. “I have no reason to believe otherwise.

No Foolin’: sports betting has chance in April budget

While he plans to reintroduce his sports betting bill in January, Pretlow doesn’t expect any movement on the issue until New York passes its budget in April.

In the past couple years, the New York Senate has put online poker in its budget proposals, but the Assembly and governor weren’t interested in including anything related to gambling.

At the end of the last session, Pretlow was frustrated that Gov. Andrew Cuomo served as a cooler for sports betting’s prospects in the state following the Supreme Court decision opening it up for states to pursue authorizing the activity, saying he didn’t expect New York to approve sports betting in 2018.

Governor expected to help New York sports betting

Now he is confident that the governor is on board, and he expects that to lead Cuomo including sports betting in the budget. During a gubernatorial debate leading up to the November elections, Cuomo stated that he did “support [sports betting] under the right places, under the right conditions.”

“I think the governor wants to do this,” Pretlow said. “I think he will probably want to put some form of sports betting in the budget as revenue enhancement.”

Getting sports betting in the governor’s budget would mean the legislature wouldn’t even have to wait until the usual end-of-session flurry in June to move on the issue.

“There may be some tweaks in subsequent legislation, but if it’s in the governor’s budget then it’s a done deal,” Pretlow said.

Lottery not in plans

Pretlow recently answered a question as to if the New York Lottery could be involved in sports betting and said that he didn’t know why not. He clarified that he thought it was possible the lottery could be involved in some way, but that it’s not going to be the lottery running sports betting in New Jersey the way that is done in Delaware and Rhode Island.

“The existing casinos wouldn’t like that, of course,” Pretlow said. “Right now, that’s not my intention. I said we could possibly do some type of sports betting through the lottery, but that’s not something we’re even thinking about right now.”

Mobile betting may need constitutional amendment

New York is having an issue with the courts in regard to daily fantasy sports and whether it falls under constitutional prohibitions against gambling.

Pretlow is aware that sports betting could have a constitutional issue when it comes to mobile/online betting.

“The constitution says that sports betting is legal in the casino, but it doesn’t say it’s legal anyplace else,” Pretlow said. “The question is that when the original legislation took the stance that sports betting is legal in casinos, if the server is in the casino and someone in the city of New York is betting on that casino’s website or app, is that enough to satisfy the constitution?”

Pretlow is hoping a constitutional amendment is not needed, but if mobile sports betting is approved this year and it is determined that there is a constitutional issue, that would cause a great delay to put New York even farther behind its neighboring states on sports betting.

How it might work

Constitutional amendments are a three-year process in New York. If the legislature asks for a constitutional amendment in 2019, it won’t reach the ballot for voters to decide until 2021.

However, if the legislature could squeeze the constitutional amendment in before the end of this month and then pass it again in 2019, having two separate legislatures vote for the amendment would put it on the ballot immediately, in November 2019.

Pretlow indicated that he would like to make this happen as a precaution. However, it would take either the governor or both branches of the legislature to call a special session, for any reason, to even be possible.

At the end of last session, there was draft language of a constitutional amendment floating around the capitol, but it never received serious consideration.

“I have lawyers looking at it, and some say it’s not needed while some say it’s needed,” Pretlow said of the amendment. “To cover myself, I would prefer to do it just to make sure it’s done. I should have done it in the regular session. I don’t have much hope of a special session being called.”

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Feds Would Have To Approve State Sports Betting Laws Under New Draft Bill In Congress

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A draft of a federal sports betting bill has appeared in Congress in which the federal government would have to approve state laws legalizing sports gambling.

Here’s a copy of the draft bill:

Sports Betting Discussion Draft

The draft is being circulated by the office of Sen. Orrin Hatch.

After promises from more than one senator to move forward on sports betting and a recent subcommittee hearing in the House of Representatives, the draft surfaced. It comes about six months after the US Supreme Court struck down the federal ban outside of Nevada.

A quick look at the bill

Here’s what the bill would do from a bird’s eye view:

  • Appears to give veto power to the federal government on state sports betting laws, if the laws don’t meet minimum standards.
  • Bans states from authorizing betting on amateur events but allows for college sports betting.
  • Amends and clarifies the federal Wire Act to allow for some amount of sports betting information to flow across state lines.
  • Mandates use of official league data by sports betting operators from sports leagues (or their proxies) through 2022.
  • Creates a “national sports wagering clearinghouse” that operators provide wagering data “in real time” or close to it.
  • Allows for interstate sports wagering compacts to be entered into between different states and tribes (also subject to AG approval).
  • Says that the federal excise tax of 0.25 percent of handle will now be placed in a “wagering trust fund” for deployment on sports betting matters.
  • Sets up minimum standards for dealing with problem gambling for operators and related to advertising.

States need fed approval

The bill creates a mechanism in which states cannot unilaterally pass laws. Instead, they need to take the law to the Department of Justice for approval. From the bill:

To request approval to administer a State sports wagering program, a State shall submit an application to the Attorney General at such time, in such manner, and accompanied by such information as the Attorney General may require.

The bill then goes into certain minimum standards that any state sports betting law must have to receive federal approval. The AG would then have 180 days to approve the law. If it finds any problems with the law under the federal guidelines set forth in this bill, then there are steps that can be taken to get into conformity with those guidelines.

It’s not entirely clear, on an initial reading of the bill, how it interacts with legal sports betting that already goes on in eight states in the US. Of course, even more states will likely pass sports betting laws before Congress might take action on this bill, which is not officially introduced yet.

Official data for sports betting

The bill gets into the issue of “official data” provided by leagues, a hot topic in state legislatures across the country this year:

With respect to any sports wager accepted on or before December 31, 2022, provide that a sports wagering operator shall determine the result of a sports wager only with data that is licensed and provided by

(I) the applicable sports organization; or

(II) an entity expressly authorized by the applicable sports organization to provide such information.

The second entity would appear to be companies like Sportradar and Genius Sports, which act as middlemen for data between sports leagues and sportsbooks.

Money from the sports betting excise tax

The bill also addresses the existing federal excise tax on sports wagering, which taxes handle — not revenue — at a rate of 0.25 percent.

That tax has created a fairly minimal amount of money from Nevada sports betting. But that amount is about to skyrocket as more and more states legalizing. That money, which is not earmarked for anything currently, is deployed for sports betting matters under the draft bill.

The bill creates and funds both a National Sports Wagering Commission and a “national sports wagering clearinghouse” with this money that work to help coordinate efforts at the national level and between states on sports betting.

The post Feds Would Have To Approve State Sports Betting Laws Under New Draft Bill In Congress appeared first on Legal Sports Report.

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The Possible DC Lottery Sports Betting Vendor Is Exaggerating How Much Money It Would Make

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We are at ground zero of a battle over how sports betting may go down in the future in Washington, DC, and perhaps the rest of the country.

On one side: an alliance of sports leagues, teams and gaming interests that just came to light in recent days as legislation moves through the DC Council.

On the other: Intralot, a Greek gaming company that serves as a lottery supplier for a dozen US jurisdictions, DC included.

The latter is telling stakeholders that if it is the single sports betting vendor in DC, it can produce DC revenue that is up to 30 times what a more open model might generate, according to a document obtained by Legal Sports Report.

That would appear to be a vast exaggeration of Intralot’s — or indeed any lottery operator’s — ability to deliver revenue to the state in real dollar terms and skips over some extremely crucial details.

Where the DC sports betting bill stands

First things first: a DC sports betting bill is getting a hearing Tuesday in the city council. Last week, a committee amended and advanced the legislation.

That bill has allowed for two different paths for sports betting:

  • A fairly open model where the DC Lottery can license and tax different sports betting operators.
  • A single vendor — likely Intralot — that would run sports betting for the lottery.

That dichotomy is what has led to a battle that has played out mostly behind the scenes in lobbying the DC Council. Operators are trying to keep potential access to the DC market open, and trying to push back on the narrative that lotteries are best suited to handle legal sports gambling.

What Intralot is selling on sports betting

Intralot is selling that it can make A LOT of money for the DC Lottery.

Here is a graphic from a document being circulated by the company that attempts to compare $100 wagered via a lottery-based system and an “independent operator” system where DC can license different sportsbooks:

Obviously, Intralot is promising a lot of money going back to DC if it gets its way — up to $17.50 per every $100 wagered would go to DC in the example on the left. By contrast, Intralot says only about 60 cents to a dollar would be realized by DC government via taxed revenue in the open market model.

But the devil is in the details.

A bad comparison

Let’s start here: Intralot is comparing apples to oranges. Its model appears to be using a high-hold sports betting model versus a traditional standard-hold model. Intralot’s model says it would pay out only 70 to 80 percent of all wagers, meaning it would hold 20 to 30 percent.

These are impossible figures to hit under a traditional sports betting model with reasonable odds. Intralot would have to:

  • Run only a parlay sports betting model (like has existed in Delaware and previously Oregon; here’s how parlay betting works with the Delaware Lottery, which also has single-game wagering;
  • provide odds much worse than bettors would find offshore or at legal operators; or,
  • create a combination of both.

In any event, that product, Intralot says, would provide net revenue of up to $24 per $100 wagered, is a disingenuous comparison point for an actual single-game wagering product like we see throughout Nevada and New Jersey.

It’s clear that the total amount of revenue provided in the independent operator model would far outstrip the Intralot model. And while DC might keep more of each dollar wagered with Intralot, there would be fewer dollars flowing in.

A more familiar and standard single-game wagering product would be more successful in trying to capture the illegal market and merely create and retain more customers, resulting in more revenue.

Apparently, that doesn’t include marketing

In both examples, marketing dollars are not included; marketing is pretty much a necessity if you want a legal sports betting operation to succeed.

In Intralot’s example, it doesn’t even factor in the cost the DC Lottery/Intralot would have to pick up, rather than it being passed onto operators in the “independent operator” mode.

We know from the European sports betting industry and the New Jersey online casino industry that marketing costs are one of the most significant expenses in sports gambling. Glossing over that fact is also pretty disingenuous.

Who is going to win?

Lotteries versus gaming operators are shaping up to be one of the major themes for legislative efforts surrounding sports betting in 2019. And DC is serving as the primary battleground.

If Intralot succeeds with getting its model implemented, lotteries in other states might want to follow its lead. The NBA, MLB and the PGA Tour, along with MGM Resorts, DraftKings and FanDuel are trying to push back against the idea in that recently formed “alliance,” as lottery-run sports betting isn’t in any of their interests.

Whatever states and lotteries do around the country, however, they should be comparing apples to apples and realizing what kind of money they might receive, depending on how sports betting happens in their jurisdictions.

The post The Possible DC Lottery Sports Betting Vendor Is Exaggerating How Much Money It Would Make appeared first on Legal Sports Report.

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Sportsbooks, Leagues Team Up For First Time In Sports Betting Lobbying; Alliance Supports Royalty Fee In DC

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Some operators and major US sports leagues apparently are working together to get a law passed to legalize sports betting in Washington, D.C.

At least three sports betting operators — MGM, DraftKings and FanDuel — are actively working with the NBA, Major League Baseball and the PGA Tour to pass a bill all of the parties involved could live with.

The sports betting alliance at a glance

The alliance was first reported by The Washington City Paper and included a one-pager circulating around the DC Council, which recently advanced a piece of sports betting legislation. Monumental Sports & Entertainment (the owner of the Washington Wizards and Capitals) and the Washington Nationals also were listed as supporters of that document.

DraftKings, for its part, confirmed with Legal Sports Report that it is aligned with the policies on that document, which can be viewed at The City Paper’s site.

That document included a list of “essential components” that all of the alliance members could live with. Among those components were items that most sports betting operators have dismissed as unnecessary, including a requirement by operators “to use official league data to settle bets.”

The league-operator alliance also supports a “small fee” equal to 0.25 percent of all money wagered on sports in DC. The fee is not termed either a “royalty” or an “integrity fee,” two monikers that fee has gone by in lobbying around the country in 2018. It now is being called a “license fee.”

The DC bill being considered originally had such a fee in it before it was stripped in a vote last week.

MGM CEO Jim Murren just a few days ago said that he was “offended” by the need for his company to pay any integrity fee.

A ‘massive benefit’

The alliance also argue this, from the lobbying document:

Giving sports organizations a direct financial interest in the new betting market will create a massive benefit to the District and the D.C. business, as it will form a strong partnership among local government, betting operators, and the sports leagues, as the leagues — with their unparalleled sports fan reach and exclusive access to content — will be incentivized to support the District’s sports betting market and drive its success.

This seems to be a new tack from the leagues, who have in the past said they deserve to be paid a fee for merely existing.

The sports leagues, of course, should already be incentivized to support a regulated market, as legal operators are attempting to compete with illegal and offshore sports betting operators. The leagues have been on record as saying moving customers from offshore books to legal ones is one of their policy goals when it comes to sports gambling.

Trying to stop a DC sports betting monopoly

Why did the leagues and some sports betting operators team up?

The two often opposed groups appear to believe it is necessary to stop what could be a monopoly for the DC Lottery in handling sports wagering.

The lottery, in legislation, as written, has two paths it could go down: an open marketplace for licensing sports betting operators, or a single vendor under the umbrella of the lottery.

In the latter scenario, the lottery, via its provider INTRALOT, would offer sports wagering through a single source throughout the District, both for land-based and mobile betting.

That company, sources tell LSR, has argued to DC and lottery officials that an exclusive contract would create more revenue than the open model.

The alliance argues that the DC Lottery “should not be the exclusive operator of mobile sports betting” arguing for a competitive market.

Gaming analysts like Eilers & Krejcik have agreed, advancing the idea that a more open sports betting market would create more revenue for DC (and in other states).

But exclusivity zones…

There is an interesting and new ask in the lobbying document, as the leagues and companies want “exclusivity zones for professional sports facilities” in DC:

“Create a 5-block zone around each of the sports facilities where no retail establishment, either through the lottery or a private operator, may operate a sports book without the express approval from the owner or lessee of the facility.”

That’s an interesting wrinkle as teams and leagues have gotten more aggressive in what they are seeking out of sports betting regulation.

Ramifications for elsewhere?

The alliance appears to be borne of a fear of the “monopoly” model being advanced in DC could be used in other states where lottery exists.

That, of course, would be a doomsday scenario for a number of sports betting operators who have designs on offering their products in other states. DraftKings Sportsbook and FanDuel Sportsbook are both providing mobile wagering in New Jersey, with deals in place to do so in other states as well.

If sports betting becomes the domain of lotteries in the US, that will significantly impact operators who would then be vying for a single contract. (We’ve already seen that in how sports betting has been implemented in Rhode Island and Delaware.) It would also limit the amount of money the leagues could see from any of its desired fees, and it’s possible/likely that lotteries would not support these at all.

In any event, the leagues and at least some sports betting operators apparently fear this could happen.

Who’s not in the alliance?

While the alliance is significant in that it combines sports leagues, teams and gaming operators, it’s certainly far from all-inclusive.

The NFL and NHL are not involved, from the side of the sports world. And MGM, DraftKings and FanDuel represent only a part of the sports betting industry, albeit a substantial one in the early days in the US. A variety of national and regional casino operators, as well as actual sports betting companies, are not signed onto this effort.

It also remains to be seen if this alliance is ported over to lobbying in other jurisdictions. But it’s certainly an amazing development that some gaming and league interests are aligned enough to work together publicly.

The post Sportsbooks, Leagues Team Up For First Time In Sports Betting Lobbying; Alliance Supports Royalty Fee In DC appeared first on Legal Sports Report.

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Rhode Island Sports Betting Doubles Today With Addition Of Twin River Tiverton Book

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Days after becoming the eighth state to take legal wagers, Rhode Island sports betting will add a second sportsbook Monday.

Twin River will open the sportsbook at the recently opened Tiverton Casino Hotel today. The facility joins the company’s Lincoln property to expand Twin River sports betting to both state casinos.

Twin River Casino, in Lincoln, started the first phase of its sportsbook a week ago. The launch came a few weeks after first anticipated, but Rhode Island sports betting still went active only months after PASPA‘s fall.

Rhode Island sports betting closes 2018

The Ocean State appears likely to be the last to start a legal sports betting operation this year. That comes as a minor surprise considering how early the state green-lighted Twin River sports betting.

The state legislature approved Rhode Island sports betting rather swiftly this summer at the request of Gov. Gina Raimondo. The governor included RI sports betting in her budget for the coming fiscal year with a revenue projection of more than $23 million.

The state lottery will operate Rhode Island sports betting, though, and finding an industry partner did not come easily. Combined with Twin River’s plans to merge with Dover Downs announced in late summer, Rhode Island waited to launch.

Only one answer to RI’s call for bids

IGT became the lone bidder to partner with the state on Twin River sports betting. Eighteen companies showed some interest, but only IGT, which already powers the state lottery, offered. IGT began working with the RI lottery 15 years ago.

William Hill backs the day-to-day operation of Rhode Island sports betting in Lincoln and Tiverton. In the small state, sports betting revenue distribution breaks down as follows:

  • State: 51 percent
  • IGT: 32 percent
  • Casino: 17 percent

Whether that sharing arrangement functions as a partnership or a high effective tax can be debated. It certainly allows the state to maximize its benefit from Twin River sports betting.

A smaller pie to slice

Even so, the delayed launch of RI sports betting forced state analysts to slash Raimondo’s originally forecasted revenue in half. The Lincoln sportsbook launched with just a quarter of the NFL season remaining and only college football’s bowl season active for wagering.

Tiverton Casino Hotel opened in September to serve the southern portion of Rhode Island, as well as southeastern Massachusetts. The Lincoln property presents a shorter drive for Boston-area residents, who likely will add to the Rhode Island sports betting handle.

Rhode Island legislators did not include mobile or online sports betting in their legislation. Limiting wagering to the two retail facilities artificially caps revenue growth potential, but such will be the case for the tiny New England state for now.

The post Rhode Island Sports Betting Doubles Today With Addition Of Twin River Tiverton Book appeared first on Legal Sports Report.

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