The views expressed here are those of the author.
A New York Times sports betting story is causing a stir in the gambling industry.
The Times has recently posted several articles exploring the potential negative impacts of legalized sports betting, including an article this past weekend that delved into the relationship between state lawmakers and industry lobbyists.
The article, titled “Cigars, Booze, Money: How a Lobbying Blitz Made Sports Betting Ubiquitous” (not to be confused with a second Times sports betting expose on Barstool Sports’ Dave Portnoy) frames state lawmakers as puppets and the gambling industry as the puppet master pulling the strings.
The Times writers certainly had enough ammunition to paint this picture (although some evidence has been disputed). That said, there is another side to this coin. The story could of just as easily highlighted the absurdity of the gambling laws in this country and why handing off such a complex and nuanced decision to state lawmakers has resulted in less-than-perfect laws.
Legislators are hearing more and more about sports betting from existing gambling operators looking to bolster and future-proof their businesses and their constituents. That puts lawmakers (many of whom are part-time) in the unenviable position of bringing a popular product to their constituents without irritating entrenched industries or coming under fire from problem gambling advocates or other groups generally opposed to gambling.
From a certain point of view, the Times story is correct, but if we add the context and nuance that these decisions are being decided in, other equally legitimate points of view come into focus.
Point No. 1: State Lawmakers are Outmatched
Lobbyists have far more influence than the public would like. But they are also a necessary cog in the legislative wheel. Lawmakers, in general, are tasked with one thing, knowing a little bit about a lot of issues. When these issues start to advance, and they need a crash course, they rely on the testimony of outside experts, their aides, bill sponsors who better grasp the specific topic, and lobbyists.
An oversimplified version of the state legislative process is this. The lobbyists start with the sponsor to gauge interest. The sponsor shops it around to other legislators. If there is a chance for passage, the sponsor and various lobbyists talk to the aides to assuage any concerns.
Unless they are staunchly opposed to gambling, lawmakers are generally open to finding a way to get to “yes” if the measure is seen as a positive that will increase revenue, create jobs, or satisfy a specific policy agenda.
Other lawmakers that view sports betting with ambivalence may trade votes, agreeing to vote for the gambling bill in exchange for a “yes” vote on another bill, anything from funding for a local project to increasing funding to reduce social harm.
Point No. 2: Many States Got a Raw Deal
Because of the way the sausage is made, it may appear some states have gotten raw deals, with the industry getting everything it wants. That said, it’s essential to understand that states, and lawmakers, have different priorities. One state may be exploring sports betting to raise revenue, while another is trying to install consumer protections, while another is trying to help existing businesses. Yet, another could be jumping on the sports betting bandwagon to promote individual rights.
What may be seen as a less-than-desirable result in one state could be the desired result in another. To put it bluntly, lawmakers are not incompetent or getting fooled. They’re trying to thread a very difficult needle while juggling dozens of other legislative needles, many of which are far more impactful than legal sports betting.
All that said, a closer look at where states have fallen victim to the deadly combination of minuscule tax rates and promotional deductions leans towards two things: first-adopter states not having a proven model to follow, and some lacking institutional knowledge of gambling, with sports betting their first bite at the gambling apple.
The good news is that we are several years post-PASPA, and states can see what their predecessors got right and wrong. The lack of institutional knowledge is fading fast, and lawmakers have a much better grasp on gambling policy heading into 2023 than they did just three years ago. The overall trend is towards more balanced laws, better policies, and funding for gambling harms.
Point No. 3: The Industry Overstates the Migration to a Legal Market from the Illegal Market
The industry doesn’t overstate the scope of the unregulated online gambling industry, but it stretches its ability to migrate players from unregulated to regulated sites simply through legalization.
A mountain of data shows that most bettors want legal, regulated sites. Notice I said most, not all. Some bettors are willing to assume the not-so-small risk of unregulated sites for one or more of the following reasons:
- Alternative payment options, like Bitcoin
- More betting markets (political betting, amateur sports, nonsports, and more)
- Less intrusive player verification processes
- Credit betting
- Anonymity, including tax reporting
Legal betting was never going to eradicate the illegal market. The goal is to chip away at it slowly and highlight their differences. Not everyone will choose the legal market, but everyone should have the opportunity to make that choice.
As the American Gaming Association noted on LinkedIn following the New York Times stories:
The bottom line is this: Perfect cannot be the enemy of good. Unregulated gambling is a far worse proposition than flawed regulated gambling.
Further, passing laws is difficult in the best scenarios, which isn’t the case with sports betting. The U.S. sports betting space is complicated, with 50 individual jurisdictions navigating unique landscapes and facing different levels of public pressure. Overarching laws handcuff some states, some state lawmakers are overwhelmed by the task, and some states are desperate for revenue and need to pass a bill.
The result is imperfect legislation that is still miles better than the alternative.
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