No Experience Required
Gambling regulators have a difficult job in the best of times. In the current era of rapid expansion that job gets exponentially more difficult, and experience is in short supply.
The Bulletin Board
VIEWS: The lack of experience among gaming regulators is increasingly apparent and far more consequential in an era of rushed gambling launches.
NEWS: A look at GeoComply data from Week 1 of the NFL Season.
NEWS: New York over-delivers on sports betting tax revenue.
BEYOND the HEADLINE: Will NY reconsider its 51% sports betting tax rate?
AROUND the WATERCOOLER: Rounders, the movie that helped ignite the Poker Boom turned 25 this week.
STRAY THOUGHTS: A couple of quotes I like.
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Experience Isn’t Critical, But it Helps
For those tasked with covering the minutiae of the gambling industry, regulators are simultaneously a source of information and frustration.
Information comes from regulators often holding public meetings and being tasked with oversight. Frustration comes from appointing talented individuals with excellent resumes… that rarely include anything to do with gambling.
This opening paragraph from WCPO.com in Kentucky says it all:
“Kentucky’s sports betting market went live Thursday with 10 newly minted gambling regulators who have 100 years of combined work experience in government and no experience in the gaming industry.”
Kentucky is far from alone.
That lack of institutional knowledge makes itself very apparent during hearings, which is where the frustration comes in.
This is taking forever: Whether it’s a multi-hour session in Massachusetts to discuss the difference between CPAs and revenue-sharing in the affiliate industry or a walkthrough on what a parlay is, regulators spend a lot of time hashing out what anyone in the industry would consider common knowledge.
I’m the first person to gripe when lawmakers and regulators rush the process, but efficiency is also necessary, and the core issue is often inexperience. What we get is a rushed process with lengthy and often unnecessary debate and a lot of 11th-hour decisions.
On purpose: The lack of experience often seems by design - as are the accelerated launch timelines. And those two things together are a dangerous cocktail.
“We’re going to learn as we go,” Kentucky Gov. Andy Beshear said of the lack of experience, per WCPO. “We’re going to make any changes that we need to. But I’m confident that we’re going to be ready on day one.”
As Chris Grove tweeted:
“To their detriment, these councils all too often lack substantial representation from the industry.
“I understand the "why" of that absence - it's hard to include industry stakeholders without seeming to play favorites, and it feels like such stakeholders are just going to talk their own book.
“But the reality is that sports betting is a complicated and nuanced topic, and what seems intuitive to an outsider may conflict with actual lived experience - sometimes profoundly.”
Watching regulators educated in real-time on these issues does not instill confidence. They don’t need to be jet fighter pilots, but I want aviation regulators to know about airplanes and the commercial airline industry. I want my local Board of Health to understand food safety and the restaurant and food service industries. Not learn as they go.
Another related issue is the lack of experience means they often pin their understanding on the testimony of a trusted source or sources - who may or may not have biases or a personal agenda. That trust bubble can be hard to penetrate, which means one side of a complex issue gets a lot more credence than the other. So, the fear of playing favorites with industry stakeholders comes to fruition.
The bottom line: Hard-nosed oversight is great, but without an understanding of the industry, you get many incongruent policies and decisions and hours and hours of wasted time.
You also get a lack of clarity. Operators need regulatory clarity. The rules need to be clearly defined. The process needs to be clearly defined. And the regulator’s expectations need to be clearly defined. That clarity is lacking in far too many places.
Extra reading on this topic: Gambling Regulators Need To Stop Solving Problems That Don’t Exist
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GeoComply Data Makes the Case For MO Sports Betting
Geocomply (a Straight to the Point sponsor) released From the Sidelines to the Mainstream, which covered Week 1 of the 2023 NFL season, on Wednesday.
The company reported 242.3 million geolocation transactions and 1.1 million new accounts created during Week 1 of the NFL season.
The number that really jumps off the page is the number of checks in Missouri, a state that has yet to legalize sports betting. Per GeoComply, between September 3-10, 553,000 geolocation checks originated in Missouri.
The best I can tell “originated” is a combination of thwarted attempts to bet in Missouri and Missourians who traveled across the border to bet in a legal state. Per GeoComply, 38,000 Missouri residents have active sports betting accounts in another legal state.
NY Sports Betting Exceeds Revenue Expectations
It’s quite rare for gambling revenue to meet pre-legalization revenue estimates. It’s even rarer to significantly exceed those estimates, which is a feat that New York mobile sports betting has managed.
“Then-Gov. Andrew Cuomo projected sports wagering taxes to be at least $500 million annually when he pushed to legalize it with the current 51% tax,” Sports Handle’s Chris Altruda (the Steve Kornacki of gambling revenue) noted in a recent column.
That 51% tax rate has led to some strong numbers. New York sportsbooks generated $694 million in tax revenue in 2022 and are on pace for $800 million in 2023, per Altruda.
Beyond the Headline: Tax Change Coming?
New York has toyed with lowering the tax rate to ease the burden on licensed operators. With revenues far exceeding what was anticipated, operators have a pretty strong case for a tax reduction.
That will still be a tough sell to the legislature, which is more than happy to put the additional tax revenue to use. And like any good state, current Gov. Kathy Hochul upped the sports betting tax collection to $900 million in her current budget. Funnily enough, New York’s current pace is $300 million more than Cuomo estimated but a $100 million shortfall given Hochul’s revised estimate.
Operators made their case for lowering the tax rate to New York lawmakers earlier this year, to no avail.
The best option might be to lower the rate by adding more licenses, which would open New York’s currently closed doors to some of the new entrants in the space, like ESPN Bet.
New York uses a tax matrix based on the number of licensed operators, which currently stands at nine. If the state increased the number of licensees to 13, the tax burden would fall from 51% to 35%.
The state will likely be a little hesitant to add more licenses. More operators doesn’t necessarily mean more revenue, which could cause a severe reduction in taxes.
On the other hand, more licenses would hopefully expand the market and increase marketing spend due to the lower tax rate. And, of course, the state would also receive another influx of four or more $25 million up-front licensing fees.
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Around the Watercooler
Social media conversations, rumors, and gossip.
A good thread on 25 Years of Rounders:
And some Extra Reading:
Stray Thoughts
Two quotes to ponder as we speed towards the weekend:
“If everyone is thinking alike, then someone isn’t thinking.” George Patton
“People of mediocre ability sometimes achieve outstanding success because they don’t know when to quit.” George Allen Sr.