By 1985, it was clear to lottery officials that ticket sales increased significantly with bigger jackpots. Jackpots are driven by tickets sales and ticket sales are dependent on population size. Small states needed something extra to boost ticket sales and jackpot sizes. In 1985, Maine, New Hampshire and Vermont created the “Tri-State Megabucks. It was a successful idea and in 1988 a separate association was formed; its game is called Powerball and is offered by 44 states. The largest Powerball jackpot to date was $786.4 million in March 2019. In1996, a second lottery association created a game that is now called Mega Millions. It is also available in 44 states. The largest Mega Millions jackpot to date was $1.5 billion which was hit in October 2018. Combining the sales in that many states worked to create huge jackpots. However, a new phenomenon has developed; with each major jackpot, players’ expectations change and it takes increasingly larger and larger jackpots to trigger the dramatic sales increases that lottery directors were seeking.
Casino gaming, like the lottery, entered the 20
th
century as an illegal business. Nevada was the first state to legalize casinos in 1931; the famous Las Vegas Strip got its start after World War II with the infamous Bugsy Siegel and his Flamingo Hotel. New Jersey became the second state to legalize casinos in Atlantic City in 1976. The first Atlantic City casino, Resorts International opened in May 1978. It took over a decade for South Dakota, the third state to legalize casino gaming, to open its first casino in Deadwood. Iowa and Illinois authorized riverboat casinos in 1989 and Colorado voters approved limited stakes gaming in three mountain towns in 1990. Missouri, Louisiana, Mississippi and Indiana had riverboat casinos by 1993. Land-based casino legislation followed the limited stakes and riverboat casino legalization. Twenty-five states now have one of those three forms of casino gambling.
Legal commercial casinos are only half the story. There are also Indian casinos in 28 states with approximately 500 casinos nationwide. Indian gaming became legal in 1988 with the passage of the National Indian Gaming Regulatory Act. The Act required any tribe wishing to operate casino to negotiate a compact or treaty with the state in which the tribe resides. The compact requirement slowed the process. But the first Indian casinos in Minnesota, Wisconsin, Washington and Connecticut were so successful that tribes in other states sought to replicate their success. Indian casino revenue has grown nearly 30 percent in the last decade and it now equals commercial casinos. Tribes in California and Oklahoma produce the most revenue. Oklahoma has over 100 casinos and California has 69 gaming operations.
Horse racing has taken an opposite course over the last 50 years. Wherever other forms of gambling were introduced, betting on horses, and dogs fell off. Horse racing has several liabilities when competing against other wagers. In traditional wagering at racetracks as much as 20 percent of the wagering is withheld by the track operations, the remainder is divided among the pool winners. By contrast, the average slot machine returns 90 percent of the wagers to each individual player in the long-term. And racetracks are more remote from population centers and offer little else to attract customers except the races. Racing has found a partial solution in ten states by putting slot machines at the tracks. The slots help support the racing and allow the tracks to offer larger purses which in turn stimulates racing and draws larger crowds. Big purses are like big lottery jackpots, they generate excitement and pull in larger audiences. In some states where slot machines are not legal, tracks have adopted an alternative using historic racing machines that are becoming more successful and increasing play more like traditional slot machines. Kentucky now has approximately 3000 historic racing machines, each winning $220 a day.
The growth of legal commercial gaming has been spectacular. In the next couple of years, Illinois, Indiana, Pennsylvania, Arkansas and possibly Georgia will have new casinos. But with each round of expansion, the opportunities for further expansion diminish. If gaming is to continue to grow and expand, something different is needed. In 2018
,
the United States Supreme Court ruled the Professional and Amateur Sports Protection Act of 1992 violated the Tenth Amendment and was therefore unconstitutional.
The decision resulted from a suit by America’s four professional sports league against a 2014 New Jersey law that legalized sports betting. The leagues argued the New Jersey law violated the PASPA. Lower courts had ruled in favor of the sports organizations, but the Supreme Court held with the state of New Jersey and thereby opened the door to the spread of sports gambling for any state that wished to legalize it.
Eleven states have legalized sports betting, six have pending legislation and 22 have legislation under consideration. Unlike, the expansion of lotteries, VLTs and casinos, sports betting is not a definite thing, it is more of a concept. Each state sees it differently and places different limitations on when and where the wagering can occur and who may engage in the activity. Nevada regulators have kept a tight rein on sports betting, as they have on all gambling in the state. Nevada locks its sports betting in a box, a casino box. Major casinos in Las Vegas spend millions of dollars to build a “sports book.” They are giant spaces with great seating, hundreds of big screen televisions broadcasting games and races and big tote boards with the odds on the various games.
When casino gaming expansion spread across the country, new states looked to Nevada or New Jersey to model their regulation. That has kept casinos reasonably uniform. Not so with sports. For example, in New Jersey, the casinos built books, but much smaller ones than in Nevada. New Jersey sports books do not require as much space because they can also book bets online; online betting is overtaking the in-house wagering. In other states, the majority of the betting will be mobile. The bets are processed through a casino license, but the bettor does not have to go into the casino; the “book” just floats in cyberspace. Still other states are allowing sports betting within the sporting venues at the games
.
Other states have given sports betting to the lotteries without the requirement of a casino license or a bricks and mortar location. It is being treated as another lottery game, one that can be played online. Oregon is just beginning to take sports bets, any cell phone in the state is potentially a betting terminal. One of the reasons for the diversity in forms lies in the structure. The business of setting the odds and taking bets is not the exclusive territory of the casinos. Casinos have partners in professional bookmakers, most from England. In lobbying for sports betting, casino corporations come with their bookmaking partners and the models they tout are based on England, not Nevada.
The American media has not been slow to see the possibilities. Major sports networks are adapting their programming to include the world of betting. The odds and results against the spread have become as important as the score of the game. The potential for play-by-play wagering is major. However, that requires real time data. Providing real time data is going to be an important part of the entire process. It is also currently a bone of contention; in Illinois the four major leagues are lobbying for an “official data source.” They would like to be that source and of course charge for it. Bookmakers and casinos are fighting back. However it turns out, the provider of the best data will be able to charge for it and it is not likely to be cheap. In the end, sports betting will become a separate industry, with casinos, bookmakers, media outlets, data providers and sports leagues all providing a part of the universe of sports gambling and looking for a cut of the action.
Sports betting is not a big deal when confined to casinos as it is in Nevada where it represents a small percentage of both total wagers and win. But let loose into cyberspace it has the potential to become a major industry. It is too soon to see the trends; only four states have been taking bets for a full year. Four more, Pennsylvania, Iowa, New York and Indiana are just getting started. Still,
Legal Sports Reports
, which tracks sports legislation and wagering activities, says since 2018, a total $10.7 billion has been wagered legally in the U.S., result in net revenues of $689.2 million. Nothing to sneeze at, but it will several years of results to begin to see the big picture and assess the impact of sports betting on traditional gaming, on the games themselves and media.
The expansion of casino gaming still has some potential jurisdictions before it reaches the end of its opportunities. Lotteries don’t have many tricks left in their bag to stimulate revenue growth and horse racing will always need additional revenue streams, as from slot machines. Sports betting on the other hand, has the potential to grow and expand for a long time. Just imagine, if you will, a Super Bowl, already the biggest betting event of the year, played in a stadium with in-venue betting and across the country in dozens of states, people watching the game and making bets play by play on their cell phone.
Whatever it may become, sports betting is already dominating the traditional media reporting. Day by day there are probably no more than ten gaming stories nationally
.
At the same time, every day there are dozens of sports events, each is a potential betting story.
Sports betting is already big news even if it is not yet big revenue. In any state with legal sports betting the “big” games have two separate narratives, one the play on the field and the other the odds and the spread. Local coverage is fast becoming part of the national coverage of sports. Sports may just be the last frontier of gaming in the United States and it may end up defining gambling for Americans.
But that is just my opinion, isn’t it?
Ken Adams
