A Solution To The Legislative Stalemate On Sports Betting Legalization In Massachusetts

Might 14th marked the four-year anniversary of the U.S. Supreme Courtroom’s resolution that struck down the federal ban on state-authorized sports activities betting. For the previous 4 years, Massachusetts – residence to one of the crucial sports-obsessed markets within the nation in Boston – has watched from the sideline as practically each different state in New England has handed sports activities betting laws. Fairly than await lawmakers to approve sports activities betting, many Massachusetts residents have opted to journey to close by states to put bets. Since sports activities betting went dwell in New Hampshire in December 2019, Massachusetts gamblers have accounted for about 15% of all cellular bets, in line with the New Hampshire Lottery. Boston-based DraftKings reported that 28% of all Tremendous Bowl bets made on its platform in New Hampshire this yr got here from clients with Massachusetts addresses.

This missed alternative is costing Massachusetts over $35 million in annual tax revenues and tens of thousands and thousands extra in licensing charges, to not point out a major discount of visitation to the state’s three licensed casinos – costing the Commonwealth many thousands and thousands extra in misplaced tax income. Nonetheless, an answer is now nearer than ever with the Massachusetts Home and Senate every passing sports activities betting payments – the primary time that’s ever occurred – and headed in direction of a convention committee to iron out the variations within the two payments earlier than the July thirty first deadline.

Whereas the Home and Senate proposals differ in a number of crucial respects – notably on the permissibility and scope of collegiate sports activities wagering, the tax fee to be imposed on operators, the variety of cellular licenses, and the breadth of promoting restrictions – these variations are removed from insurmountable. Having intently adopted the state-by-state legislative panorama round sports activities betting legalization because the demise of the federal ban, we consider that the approaches taken in different states to resolve comparable coverage disagreements provide workable options to the convention committee members as they search to resolve their variations. Listed below are our suggestions.

School Betting. One main hole between lawmakers is betting on faculty sports activities. The Home invoice would allow wagering on all faculty video games, whereas the Senate invoice proposes a complete ban on such betting. A blanket prohibition finds precedent solely in Oregon, which is a smaller and fewer lively market. And it’s no coincidence that Oregon is the one state to have misplaced cash in its first yr of legalized sports activities betting. Whereas we consider that collegiate betting bans are unwise, ineffective, and counterproductive – inflicting a migration of bettors and tax {dollars} to neighboring states – we additionally acknowledge {that a} compromise could also be needed right here, particularly given the massive variety of collegiate athletic packages in Massachusetts and the not-too-distant reminiscence of the late 1970’s point-shaving scandal involving Boston School. However there is no such thing as a must reinvent the wheel.

Drawing upon the precedent of at the very least 10 different states (together with New Hampshire, New York, and Rhode Island), Massachusetts lawmakers ought to compromise on the difficulty of collegiate sports activities betting by excluding solely bets involving in-state schools and collegiate video games performed inside state borders, in addition to proposition bets on particular person faculty gamers. Such a focused ban would adequately shield the Commonwealth’s schools and universities, whereas eliminating the bets with the best perceived danger: these primarily based on a participant’s personal particular person efficiency.

That is the compromise that has been struck in practically each state which has sought to impose restrictions on collegiate sports activities betting. There isn’t any want for an outright ban. It wouldn’t cease the betting anyway – it could simply ship Massachusetts residents to any variety of bordering states (similar to Connecticut, New Hampshire, New York, and Rhode Island) that permit wagering on Massachusetts schools, or, worse, to offshore web sites which lack any modicum of client protections. Additional, it could stop any in-state monitoring of such bets, leaving regulators (and the universities and universities themselves) fully at midnight about wagers made on these video games and unable to detect suspicious wagers. The underside line: Massachusetts would lose out on thousands and thousands of {dollars} in annual tax income (largely to neighboring states) with out making a significant dent on collegiate sports activities betting and forfeiting an essential detection device.

One additional suggestion: if a partial collegiate ban have been enacted, lawmakers ought to embrace a carve-out allowing wagers on main intercollegiate occasions (similar to faculty soccer bowl video games and NCAA March Insanity match video games) involving Massachusetts schools and universities. (Connecticut accredited an identical carve-out in its sports activities betting legislation to permit for wagers on match video games involving Connecticut schools). These main occasions provide important income potential and carry much less danger because of their high-profile nature and the sheer variety of eyeballs on the video games.

Tax Charge. The Home invoice proposes that operators pay a 15% tax on revenues from cellular sports activities bets, whereas the Senate proposes a 35% tax on the identical class of bets. As help for the upper tax fee, some Senate lawmakers have pointed to the 50% or increased tax fee in three of the 4 states surrounding Massachusetts. Nonetheless, the nation-leading charges in New Hampshire and Rhode Island are predicated on market exclusivity for a single operator. Moreover, New York’s 51% tax fee – in a state which permits 9 cellular operators – has made it troublesome for operators to show a revenue, with one distinguished on-line sports activities betting firm (BetMGM) lately asserting that it could be scaling again its advertising expenditures in New York as a result of excessive tax fee. Alongside the identical strains, it’s price noting that the co-sponsors of New York’s cellular sports activities betting laws lately proposed amendments that might decrease the tax fee for on-line wagers to 25% by 2024, elevating the prospect that New York’s prohibitive tax construction will quickly be overhauled.

However these are outliers in any occasion. Most states which have licensed sports activities betting because the demise of the federal ban tax on-line revenues at share charges within the excessive single-digits to the low-to-mid teenagers. A logical compromise in Massachusetts could be to land at 20%, which splits the distinction between the Home invoice and final yr’s Senate management proposal. This fee would nonetheless be among the many highest within the nation. As such, Massachusetts lawmakers also needs to embrace a provision that might permit betting firms to deduct promotional or free bets from taxable revenues, simply as lawmakers in different states with excessive tax charges (similar to Pennsylvania) have carried out. (One suggestion right here could be to put a cap on the quantity of the deduction for the primary three years to generate extra tax income for the Commonwealth through the preliminary launch part). With out a write-off or deduction for promotional bets, operators could be paying a tax on transactions the place cash doesn’t change arms, thereby artificially inflating the online tax fee.

Cell Licenses. The Home invoice gives for a limiteless variety of cellular sports activities betting licenses with no tethering requirement, that means they don’t have to be tied to a brick-and-mortar on line casino. Conversely, the Senate invoice permits for simply 9 cellular licenses, one for every of the three state-licensed casinos and the rest awarded underneath a aggressive bidding course of. No state with a comparable inhabitants dimension presents fewer sports activities betting licenses than the Senate’s proposal.

For a compromise resolution, Massachusetts lawmakers ought to take into account the approaches taken by equally sized states to find out the optimum variety of licenses. For instance, in Maryland, which has practically a million fewer individuals than Massachusetts, lawmakers have licensed over 100 sports activities betting licenses, together with 60 on-line licenses. In Ohio, lawmakers have licensed 65 licenses for sports activities betting – consisting of 25 on-line and 40 retail licenses – along with the possibly as much as 2,500 bars and eating places that shall be allowed to have sports activities betting kiosks inside their industrial institutions. Indiana, with roughly 140,000 fewer individuals than Massachusetts, has already licensed 15 brick-and-mortar sportsbooks and 17 on-line sportsbooks (with the potential to problem as much as 40 on-line sports activities betting licenses). Arizona, a barely bigger state than Massachusetts, has licensed 20 on-line sports activities betting licenses– 10 of that are allotted to the state’s skilled sports activities groups. Lastly, Kansas, which is one-third the inhabitants dimension of Massachusetts, lately enacted a sports activities betting legislation that may permit for 12 on-line sports activities betting operators plus kiosks at skilled sports activities services and at as much as 200 retail areas. These states replicate a nationwide development in direction of better stakeholder participation, not fewer licenses.

Drawing upon these shut comparators, Massachusetts lawmakers ought to authorize between 16 and 20 on-line licenses – an quantity that might be consistent with most equally sized states. Moreover, lawmakers ought to take into account permitting the Commonwealth’s skilled sports activities franchises to host sportsbooks (together with betting kiosks) at their stadium and enviornment services, as an rising variety of states (together with Arizona, Illinois, Kansas, Maryland, and Ohio) have carried out. Actually, subsequent yr’s Tremendous Bowl at State Farm Stadium in Glendale, Arizona would be the first one performed at a venue with an in-stadium sportsbook. The instances are actually altering, and the nation’s most sports-obsessed market ought to be a part of this rising nationwide development. Whereas a lot of the latest focus is understandably on cellular sports activities betting – since such bets account for roughly 85% of the general sports activities betting market – let’s not lose sight of the truth that the Commonwealth’s iconic skilled sports activities franchises (the Pink Sox, Celtics, Patriots and Bruins) – with their tens of thousands and thousands of loyal followers – characterize one of the best and most cost-effective method of constructing a sturdy retail market, which is able to inure to the good thing about all stakeholders.

Lastly, we also needs to guarantee truthful and equitable entry. In the direction of that finish, a specified variety of licenses ought to be earmarked for minority and women-owned companies. (A number of states, together with Maryland and Virginia, emphasize variety of possession in its licensing standards). As well as, sports activities betting kiosks ought to be allowed in choose bars and eating places, notably these which might be already state-licensed lottery brokers. (Maryland, Ohio, Montana, and the District of Columbia already permit sports activities betting kiosks in bars and eating places). Because the group Truthful Play Massachusetts accurately factors out, this would supply extra income to the state above and past simply having bets made in casinos and on-line; would guarantee better participation by small companies (a lot of that are minority-owned); and, equally essential, would assist these small companies retain and create extra jobs. In a Commonwealth that has grow to be a hub for tech and innovation, we should always make sure that all firms get a good likelihood to take part in sports activities betting.

Promoting Restrictions. The Home invoice requires that sportsbook promoting usually not be misleading, false, deceptive, unfaithful, or attraction to individuals underneath the age of 21. In contrast, the Senate invoice imposes stricter promoting guidelines, together with a “whistle to whistle” ban on sportsbook adverts throughout dwell televised sporting occasions (together with each 5 minutes earlier than and after the sport), a ban on in-arena sportsbook adverts which might be disruptive of the expertise, and customarily requires that sportsbook adverts be positioned solely in mediums the place at the very least 85% of the viewers is 21 or older.

Fairly than codify these restrictions, Massachusetts lawmakers ought to defer to the experience of the Massachusetts Gaming Fee (”MGC”), the state’s extremely regarded playing regulatory company. The MGC lately ready a white paper on playing promoting practices in anticipation of sports activities betting changing into authorized within the Commonwealth. As they put together for that chance, the MGC has already gotten the bounce on the method by learning the gaming promoting rules (together with these pertaining to sports activities betting) enacted by different states. The overwhelming majority of those states, together with New York, Colorado, and Pennsylvania, have deferred to the experience of their gaming commissions or equal regulatory our bodies on the difficulty of playing promoting. So too ought to Massachusetts, particularly given the numerous advance work carried out by the MGC. A serious benefit of going this route could be the chance for public remark by the regulatory rulemaking course of, a function that’s usually not obtainable within the legislative enviornment.

In brief, there is no such thing as a must reinvent the wheel. There are answers to every particular person problem which have been tried and examined in different jurisdictions. If they’re resolved by the tip of the session, Massachusetts bettors might place wagers on the 2023 Tremendous Bowl and get again to main from the entrance.

John Nucci, a latest graduate of Penn State Regulation, co-authored this text. Mr. Nucci lately served because the President of the Penn State Regulation Sports activities Regulation Society. He was awarded first-place within the 2021 Sports activities Legal professionals Affiliation Writing Competitors. He might be reached on Twitter at @JNucci23.