Sports betting has spread across the US, but several pockets of resistance persist. Some, like Alabama and South Carolina, are expected. Others, like Missouri and Massachusetts, are not.
The saying, “not see the forest for the trees,” helps explain the inability to pass sports betting legislation in states that look good on paper. Merriam-Webster defines the saying as follows: “to not understand or appreciate a larger situation, problem, etc., because one is considering only a few parts of it.”
And that is precisely what has hampered efforts in several states.
Stakeholders and special interests from all sides of the issue swoop in to influence lawmakers with a cursory understanding of the issue with their vision of how the state’s gambling industry should be structured. In some cases, these disputes sink legislative efforts.
It’s not all rainbows and puppy dogs in states that pass legislation. In some instances, the whispers in the ears of lawmakers may not derail the legislation, but they do damage it. Lawmakers draw lines in the sand over meaningless and/or unconnected issues without considering the second-order effect of watering down and undermining the critical policies that determine a market’s success.
Textbook Example of a Feel-Good Regulation
The perfect example of a meaningless policy is college betting bans. In most states considering college betting prohibitions, a compromise is reached, resulting in a ban on in-state college betting – the epitome of a feel-good policy.
These prohibitions contradict the stated goals of legalization, creating revenue and shifting bettors from illegal to legal markets. Prohibitions keep bettors in the black market and make regulated sites less competitive.
They also don’t work. You can’t bet on Rutgers in New Jersey, but you can bet on Rutgers from any other legal US state. I’d love to know how prohibiting betting on Rutgers in New Jersey protects the integrity of Rutgers’ games.
The notion that this prohibition somehow protects Rutgers’ athletes from shady characters or the temptation to place bets against their team assumes three incredible things:
- A Rutgers athlete, coach, or staff member can open an account with a legal sportsbook in their name and place bets against the team without getting caught.
- A match-fixer can’t contact a Rutgers athlete, in-state or out-of-state, and place bets or contact a coconspirator in another state.
- These bets can’t be placed from New Jersey at offshore sportsbooks.
Know Your Role
One of the interesting aspects of these prohibitive policies is regulators do not make them. Instead, they are codified in the law passed in state legislatures. This is important for a simple reason: Regulators can change their minds at any time, but laws must be changed through the long, drawn-out legislative process.
We’ve seen that in states that prohibit betting on esports in law verse the states that put the decision in the hands of regulators, some of whom first prohibited esports betting but now allow it.
When legislators step beyond their mandates, they tie the hands of regulators, who should handle what events and contests are acceptable.
Another example of legislative overreach comes from a new report from the state of Colorado.
Hurry Up and Launch!
The performance audit commissioned by Colorado illustrates the problems when legislators step across the line and into the regulatory world.
Per the report’s key finding section:
“During the first year of regulating sports betting, the Division of Gaming (Division), within the Department of Revenue (Department), did not have an effective process to investigate sports betting operations for temporary licensure, or to collect sufficient documentation to determine if sports betting operations’ monthly tax filings were accurate.”
Temporary licenses in Colorado didn’t turn into permanent licenses. Instead, they simply renewed the temporary licenses for another two years. On top of that, per the report, “The Division did not complete minimum background investigative procedures for the 5 licensed operators we sampled, and the procedures that were completed may not have provided relevant information needed to fully inform the Division’s licensing recommendations to the Commission.”
The opposite is happening in Maine, where regulators have been clear that they will take their time despite calls to hurry up. Per a Legal Sports Report interview with Milton Champion, executive director of the Maine Gambling Control Unit:
“It’s our time to do this, but it doesn’t mean we need to roll it out and be real fast about it. I’m not going to sit on this stuff, I know how important it is to people. But I don’t want to rush this out and have Maine look bad. Rules don’t get done in a week. I hate to be disappointing to people, but I’d rather be realistic and then roll them out in six to eight months and have people happy because we did it so quick.”
This is one of the problems when lawmakers don’t let regulators regulate. The regulators should be determining licensing and launch timelines, not lawmakers.
It is the meddling of politicians that causes problems such as those that occurred in Colorado. The direction should be that the pace should be determined by the regulators. The regulators are overwhelmed trying to stand up verticals that they hardly understand. https://t.co/zjNvXVgJPh
— Richard Schuetz (@Schuetzinc) June 15, 2022
Rushed regulators cannot provide the oversight that legal, regulated markets promise. That leads to reports like we have from Colorado, and the only reason we know about Colorado’s failures is that someone had the good sense to require the performance audit. One wonders what similar audits would turn up in other states?