Legalized sports wagering from the perspectives of casinos, leagues

   

With the federal prohibition lifted, Missouri now has the ability to open up sports betting in the state.

There are multiple measures in the General Assembly that would do that very thing. The proposals — four in the Senate and two in the House — vary on tax rate, regulations, and regulatory body along with several framework provisions.

And just like most hot topics, there are several entities proposing ideas on just how it should happen in Missouri. The casinos and professional sports leagues have both presented ideas on just what sports waging in Missouri should look like.

From the leagues

“In general, what we are looking for in a sports betting bill [are] items that protect the integrity of sports and help us preserve the spontaneous unscripted nature of sports for future generations of fans,” said Bryan Seeley with Major League Baseball. “If Missouri is going to legalize sports bettings, we think it should be done in a way that really puts fans and sports first and recognizes that there are increased risks and increased costs that go along with vastly increased sports betting.”

Certain provisions that are important to the leagues: providing tools for investigators and regulators to police potential manipulation of the sport, requiring casinos comply with investigations, mandating casinos notify sports teams if they know about potential manipulation or use of insider information of a game, a voice in what kind of betting can be offered, and mobile betting.

The overall theme to what they are looking for in sports betting legalization, according to Seeley, is the protection of the integrity of game.

A big part of that is the type of betting offered on games and the games being bet on. Betting on minor league games could pose an increased risk and so could in-game betting, Seeley noted.

MLB currently has more than 100 minor league teams. Those players, coaches, and umpires make a lot less money than their major league counterparts. If betting opened up on minor league games, that would create a potential integrity risk, according to Seeley.

An increased risk on the league is why Seeley is weary of in-game betting. In-game betting would allow betting on what the next batter is going to do — a strike, a bunt, a hit — instead of whether the Cardinals will beat the Cubs.

“Those smaller outcomes are much easier to manipulate than manipulating the outcome of a nine-inning game involving 20 players,” said Seeley. “So, we want to have a say in what kind of betting can be offered and what kind of events betting is offered on.”

But if casinos do want to do offer in-game betting, it makes the most sense for casinos to use official data, according to Seeley. He noted that unofficial data could have different results for the speed of a pitch, if something was an error or hit, and so forth. It is important that the same bet at different casinos has the same result.

Also playing into the integrity factor of the game, the league would like a cut of the pie on their games to counteract added risk. Seeley said they believe if casinos are going to offering betting on their games, the casino should give them a small percentage of what they are making.

“We face vastly increased risks and we face increased costs,” said Seeley. “Horse racing is actually a good example, too. That is an example of where part of the purse, part of the betting, actually goes to the tracks and goes to the horses. Which is kind of the model we are asking for, where a small percentage of the money — much smaller than in horse racing — goes to us.”

From the casinos

When it comes to legalizing sports wagering, Missouri does not have to start from scratch. Mike Winter, Executive Director of the Missouri Gaming Association, pointed to other markets here in the United States and around the world as explains to be based off of.

“It is not reinventing the wheel because Nevada has been doing it for decades. There is a good track record in Nevada of how to do it and how it needs to be regulated properly,” said Winter. “A lot of the operators who operate in Missouri already have operations in Nevada so they have been around sports betting.”

It is important to have a good regulatory framework in Missouri that gives consumers assurance that their bets are handled properly and they will get paid, he noted. That includes running bets through a licensed casino or casino platform and giving the Missouri Gaming Commission regulatory authority and rulemaking ability.

Since casinos are already regulated by the gaming commission, Winter said it makes sense to give them regulatory authority over sports wagering. He also noted that they have rulemaking abilities as is, and that should be extended to include a new area of the industry.

Winter raised concerns over single-source data requirements, fees paid to leagues, and giving leagues abilities to regulate what games can be bet on.

“Whether you want to call it an integrity fee or a royalty fee, which is off the total amount wagered, off of the handle, we have concerns with that,” said Winter. “The issue with the integrity fee or royalty fee is that sports betting has a relatively small profit margin.”

On average, 95 percent of all money wagered at a sports book is paid to the winning bettors, according to Winter. The example he presented was on a $100 bet, $95 would be paid to winners, $0.25 would go to a federal excise tax, $3.35 would go to overhead costs, and — under one proposal — $0.34 would go to Missouri, leaving the casino with $1.06 in earnings.

Sports wagering is not a big money-maker for casinos, with Winter noting, “We view it as another amenity we can offer our patrons.”

The casinos also raised concerns about provisions that would require sports betting operators to only get data through the professional sports leagues. He pointed out that in Vegas and other places around the world with legalized sports betting, there has been no requirement to only use one specific entities data.

“We view it as more of a statutory stream of revenue going to the sports league by requiring in the statute that we would have to contract with them or an entity they tell us to contract with. It is requiring a sole source of data rather than allowing us to determine who we want to purchase that from,” said Winter.

Sports wagering is simply another option Missouri casinos would like to be able to offer, Winter said. And the Show-Me State has several models to work from as they create the framework for which it can operate.

The bills

The bills in the General Assembly for the 2019 session include SB 44, SB 187, SB 195, SB 222, HB 119, and HB 859.  

Sen. Lincoln Hough’s bill would impose a 6.75 percent tax on the adjusted gross receipts. Sen. Bill Eigel’s bill would impose a rate of 6.25 percent tax on the adjusted gross receipts received from sports wagering. Both bills give the Missouri Gaming Commission regulatory and rulemaking authority. 

Sen. Denny Hoskins’ bill, which is on the Senate’s informal perfection calendar, would impose a 12 percent tax on the adjusted gross receipts received from wagers on sporting events. It also imposes an administrative fee at a rate of 2.5 percent of adjusted gross receipts from wagers on sporting events.

The two House bills will be heard in committee on Wednesday.

Rep. Cody Smith’s bill would impose a rate of 6.25 percent tax on the adjusted gross receipts received from sports wagering. The bill includes a 0.75 percent fee of the amount wagered paid to the sports governing body.

Rep. Robert Ross’ bill would impose a 6.75 percent tax on the adjusted gross receipts. The measure gives the Missouri Gaming Commission regulatory and rulemaking authority.