It All Evens Out
New research in Massachusetts points out the benefits and drawbacks of legal sports betting, with the latter raising concerns from regulators.
The Bulletin Board
THE LEDE: New research in Massachusetts calls sports betting “a wash.”
ROUNDUP: Tribes continue to choose Kambi; ESPN Bet launches FanCenter; DraftKings announces “Early Exit” refunds.
VIEWS: The gambling loss deduction cap is growing increasingly contentious.
BEYOND the HEADLINE: Quintenz confirmation somehow gets messier.
AROUND the WATERCOOLER: Sports betting takes some lumps at a recent research summit.
STRAY THOUGHTS: Another earnings call?
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The Lede: News: MA Research Calls Sports Betting “Largely a Wash”
The legalization of sports betting was “slightly positive” but “largely a wash” for the Massachusetts economy in its first year, Donahue Institute Research Manager Thomas Peake told gambling regulators last week.
Per the meeting materials submitted to the Massachusetts Gaming Commission:
“A major finding from our early research on sports wagering is that, in every respect, the positive impacts to the Commonwealth generated by this new industry are dwarfed by the positive impacts generated by other forms of gambling in the state”
According to Peake’s research, legal sports betting created just 118 jobs, which pales in comparison to the more than 15,000 jobs casinos created. That led to the conclusion that, “The new activity has had a net negative impact on private employment in other industry sectors.”
He also found little evidence of sports betting adding to the overall economy, something land-based gaming does contribute to:
“Legalized gambling also supports almost $3.6 billion in Output (sales), with $2.5 billion of that being Value Added (gross state product). Only 2.0 percent of Output from legalized gambling is generated by mobile sports betting. Mobile sports betting’s relatively small share is likely a result of its limited in-state vendor spending and limited direct employment.”
On top of jobs and economic impact, there were two other hints of cannibalization, as casino revenue declined for the first time in FY 2024:
“Casino revenue declined by 0.9 percent in FY2024, the first year-on-year decline since Plainridge Park Casino opened in 2015. It is possible that the declines between FY2023 and FY2024 were only minor fluctuations in what will prove to be relatively stable year-to-year revenue. However, the immediate leveling off of casino revenue once sports betting was introduced is striking.”
But more interesting, and an argument to keep an eye on moving forward, is evidence that sports betting revenue would be spent elsewhere:
“An estimated $333.7 million (71 percent of spending) were reallocated away from other types of economic activities and towards mobile sports betting. In other words, we estimate that these funds would have been spent elsewhere in the economy if not for legalized sports betting, a trend that we refer to as consumption reallocation.”
Another interesting finding was the legal, regulated market’s ability to shift customers from gray and black market sites:
“We estimate that 29 percent of spending on mobile sports betting, or just under $137 million, was recaptured from out-of-state or “gray market” betting. The estimate is based on an online panel survey where 29% of patrons said they would have spent their money on some other type of sports betting if mobile sports betting had not been legalized in Massachusetts.”
The findings have some wondering (and not for the first time) if the juice is worth the squeeze:
Roundup: Tribes Choose Kambi; ESPN Bet Launches FanCenter; DK Announces Early Exit
Kambi continues to be the sportsbook of choice for tribes [Indian Gaming]: “Kambi has strengthened its partnership with Wind Creek Hospitality through a multi-year agreement to provide its premium on-property sportsbook solution to Wind Creek Bethlehem in Pennsylvania. The agreement builds on the existing collaboration between Kambi and Wind Creek Hospitality.” Kambi is also partnered with Seneca Nation of Indians via Seneca Gaming Corporation, Cowlitz Indian Tribe via ilani, Winnebago Tribe of Nebraska via WarHorse Gaming, Mohegan Tribe via Mohegan Gaming and Entertainment, Forest County Potawatomi Community via Potawatomi Casino Hotel, Choctaw Nation of Oklahoma, Pokagon Band of Potawatomi Indians via Four Winds Casinos, Tohono O'odham Nation via Desert Diamond Casinos, Prairie Band Potawatomi Nation, and Saginaw Chippewa Indian Tribe via Soaring Eagle Casino and Resort.
ESPN Bet further integrates with ESPN with “FanCenter” launch [InGame]: Soon after news of a landmark deal between ESPN and the NFL (still unofficial at this point), there is more reason to be bullish on ESPN Bet, with the announced launch of FanCenter. “In the coming weeks, ESPN Bet is launching FanCenter, a feature that creates a personalized betting hub within the sportsbook app, seamlessly integrating users’ favorite teams, players, and most importantly, their fantasy rosters into one streamlined betting experience,” Jeff Edelstein reported at InGame. “This is literally a dream product for people who like betting and love to play fantasy, because your entire roster is in one place,” said Aaron LaBerge, chief technology officer and head of interactive at Penn Entertainment, during a recent preview of the feature. “This makes it completely seamless and frictionless.”
DraftKings unveils “Early Exit” injury refund program [Legal Sports Report]: DraftKings is the latest sportsbook to introduce a policy that voids bets when players leave games early (Fanatics recently launched “Fair Play” and PointsBet had the OG version with its good “Karma Kommittee”). Per LSR: “DraftKings rolled out a new refund policy Friday that credits customers when a player exits a game early due to injury.”
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Views: Opposition to Gambling Loss Deduction Cap Grows, But Chances for Repeal Still Slim
There’s plenty of opposition to the One Big Beautiful Act’s provision that limits gambling loss deduction to 90% of winnings.
Nevada Rep. Dina Titus is leading the charge to overturn the provision. Titus introduced the FAIR BET Act to restore 100% deductions. The legislation is co-sponsored by Reps. Ro Khanna and Troy Nehls (a Republican). However, as I noted, the supporters of the measure in the House of Representatives seem to be picking an unnecessary fight with the Senate:
As I said, this doesn’t seem like a great way to convince them to change their minds.
A second bill has also been introduced in the House, HR 4630, introduced by Kentucky Rep. Andy Barr. The bill was referred to the Ways and Means Committee (Barr is a member), and if action is taken, Barr’s bill is likely to be the vehicle, as he is part of the Republican majority.
Nevada Sen. Catherine Cortez Masto also introduced legislation to repeal the cap, dubbed the Full House Act. Cortez Masto also made the issue political, as she criticized it as a "Republican piece of legislation that is actually causing people to pay taxes on money they lost." The bill was blocked by Senate Republicans.
Another skeptical party is Texas Sen. Ted Cruz, who stated he doesn't know any senator (Republican or Democrat) who thinks keeping the 90% cap is a "good idea," implying broad opposition, though he noted fixing it could be "complicated.”
And then there is industry opposition — although I’d point out that executives have spent far more time talking about the benefits of increased interest and depreciation expense deductions than the negative impact of the gambling loss deduction cap.
BetMGM CEO Adam Greenblatt made speculative, but optimistic, comments about the gambling loss deduction cap that was passed in the One Big Beautiful Act, and the subsequent efforts to return the loss cap to 100%:
“I think this is going to go away. I think there are enough smart people who recognize that this may not have been the best approach to take. There are a number of bills underway to unwind the 90% cap. And frankly, we've run all the scenarios on the numbers, and the current framework can result in some anomalous outcomes that don't make sense. We think the rational outcome will prevail, and we think that this is going to go away.”
BetMGM CEO Bill Hornbuckle also spoke about the gambling loss deduction cap during the company’s earnings call, noting that he, along with Caesars CEO Tom Reeg and Wynn CEO Craig Billings, met with House Ways and Means Chairman Jason Smith to discuss the newly imposed 90% cap.
“Last week, we had the opportunity to meet with the House Committee Chair, focusing specifically on the 90% issue of losses. He's going to help us, as well as Congresswoman Dina Titus, to get that corrected because we don't think that's a fair deal.”
And there’s also support for keeping the 90% cap intact, per Punchbowl News:
News: Advancing American Freedom, a conservative think tank helmed by former Vice President Mike Pence, is lobbying Hill offices against a push to make gambling losses 100% tax-deductible.
Here’s the memo being circulated to congressional offices.
“Americans have the freedom to gamble on sports, but why should American taxpayers foot the tax bill for sports gambling?” the memo argues. “Congress should encourage a pro-growth tax code by declining to reinstate full expensing for gambling losses.”
Beyond the Headline: Quintenz Confirmation Gets Messy
And then there is the twice-delayed confirmation hearing for President Trump’s pick to head the Commodity Futures Trading Commission (CFTC), Brian Quintenz.
According to Semafor, Quintenz’s nomination is in limbo, with powerful forces lined up on both sides:
“Allies of Brian Quintenz, who would oversee much of the administration’s crypto agenda if confirmed, rallied to insulate the former CFTC commissioner against pushback from the digital assets and gambling industries.
“Quintenz’s current boss, Marc Andreessen, made calls on his behalf, a person familiar told Semafor. Two other people familiar said acting CFTC Chair Caroline Pham fanned opposition to Quintenz during multiple closed-door conversations in hopes of remaining atop the agency.”
Titus is also calling for an investigation into Quintenz’s correspondence (which was first broached by Dustin Gouker’s freedom of information request) and his ties to Kalshi:
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Around the Watercooler
Social media conversations, rumors, and gossip.
Let’s call this the predictable chaos from rapid legalization.
Anyone who follows the newsletter closely knows that I love it when non-industry people discuss the gambling industry.
The latest example is this interesting X thread from John Arnold, the Co-Chair of Arnold Ventures, who hosted an event along with the American Institute for Boys and Men, where online sports betting was discussed.
Here are some of his takeaways:
But it’s his final takeaway that stuck out to me:
I’ve had numerous conversations about the recent betting integrity scandals around single pitches, and several people have asked why people are acting as if these offerings blindsided them. To which, I’ve said something along the lines of, “Remember when the industry told critics they were being hyperbolic and you can't bet on every pitch?”
When legalization and regulation were happening at a lightning pace post-PASPA ruling, the industry dismissed the notion of betting on every pitch, saying that was not how sports betting worked, then the lobbyists coughed and said ‘Yet.’
For years, I’ve been screaming, “SLOW DOWN,” but here we are, dealing with easily avoidable messes.
Friend of the newsletter Joe Brennan Jr. was also in attendance (I was invited but unfortunately could not attend).
You can hear Joe’s thoughts on the research summit here.
Stray Thoughts
A few things stood out to me from the Robinhood earnings call.
Since launching in March, Robinhood has seen over 2 billion contracts traded via its distribution deal with Kalshi – every trade is valued at $1 – with 90-95% of those being on sports markets.
The $1 billion traded in Q2 generated $10 million in revenue for Robinhood. For comparison, FanDuel reported $1.1 billion in US sports betting revenue in Q2 2024
According to analysis from InGame, more than half of Kalshi’s volume ($1.87 billion in trades) over the period came from Robinhood.
Basically, I’m still trying to understand how we’ve reached DEFCON 1, ‘Maximum readiness, signaling imminent or ongoing nuclear war,’ with prediction markets, when the revenue (in a 50-state model) is so small.
Yes, I understand it’s the early days, and that offerings could be significantly expanded, but DEFCON 4 (increased intelligence watch and strengthened security measures) seems like the appropriate level.