In the first year of widespread legalized sports betting in the US, we’ve seen 17 states take the plunge. The states that were the first movers in this space provide a good example of how it can be done and the profits that can be made. They also provide some examples of what mistakes future states should try to avoid. I thought it would be interesting to highlight the biggest mistake made by each state so far. First, let’s look at the states where you can currently place a wager. Presented in order of legalization, starting with Nevada.
Nevada: Tethering to a Casino
Nevada is far and away the industry gold standard for how sports betting can be done. In Nevada, sports betting is used as both a profit center and as a mechanism to drive traffic to casinos. That latter point may be why Nevada chose to require in-person registration to open a mobile account and in-person deposits and withdrawals. This tethering to the casino inhibits sign-ups in an age where identity verification can be done remotely with ease. Online banking may be popular, but Nevada decided that the only way they want you banking with a casino is via cash in-person at the casino. These limitations restrict the liquidity of the mobile product in Nevada.
Delaware: No Competition, No Innovation
On June 5, 2018, Delaware became the first state outside Nevada to offer full single-game wagering. At the time, many commented that tiny Delaware was eating New Jersey’s lunch by beating them to market by nearly two weeks. However, the product available today over one year later is almost identical to what was available to bettors on that June day. In other words, there’s been no innovation. Single-game wagering is still limited to just the state’s three casinos. There’s only one approved vendor for sports betting lines in the state and there’s no mobile betting. The vendor, William Hill, has mobile betting in other states. However, given that Delaware represents just a small slice of William Hill’s revenue, there’s no incentive for sinking money into a mobile solution. If there was competition in the small state, there would have likely been a mobile product by now.
New Jersey: Afraid of NJ Colleges
New Jersey has done a lot of things right in its first year of legalized betting. It has a fully autonomous mobile-betting solution. It has the most competitive market in the country. However, it also has a short-sighted restriction that prevents wagering on New Jersey colleges, as well as any collegiate sporting event being played in the Garden State. The clause was written in 2011 when the state first attempted to legalize sports betting via a ballot referendum. At the time, nobody knew how much the industry would advance in the following eight years — today it’s possible to track the digital fingerprint of just about every wager.
It’s becoming accepted fact that legalized betting markets bring greater sports integrity. Black markets increase the threat of match-fixing and by banning bets on NJ colleges, the state doesn’t help eradicate that possibility. Unfortunately for New Jersey, the wording that prevents wagering on New Jersey collegiate sports is now baked into the state constitution. It’ll require another statewide ballot referendum to change it.
Mississippi: No Mobile in This State
Mississippi took a curious route to legalized sports betting. It approved daily fantasy sports wagering and inadvertently authorized sports wagering in the process. However, that law authorized wagering only at casinos. This currently prevents the Magnolia State from offering a mobile product except when the bettor is physically at a casino. As a result, despite over 20 Mississippi casinos currently offering a sports wagering product, the revenue result has been underwhelming. Mississippi sports betting handle peaked in November 2018 at $44.5 million and has decreased each month since. February 2019 saw only $17.4 million in bets. If Mississippi was able to have the same 15/85 split between physical wagers and online wagers that New Jersey does, it would likely book nine figures of betting handle every month.
West Virginia: Confusion Reigns
West Virginia was an early adopter of sports wagering. The set-up looked pretty good. There was competition, an operator-friendly tax rate, and mobile betting. The state quickly had major players with William Hill and FanDuel taking up residence. However, there was also dysfunction in the capitol, as the Director of the Lottery, the de facto regulatory body in West Virginia, abruptly resigned after sports wagering became law. The Communications Director then went radio silent. When the Governor is also the owner of the state’s only stand-alone casino, there’s always speculation of an uneven playing field.
Things in West Virginia seemed to be going well given its size and population. However, in early March, one of the state’s three sports book operators went dark, literally. Without warning, it turned off the lights in the sports book and shut down its mobile app. It took over three weeks before a Freedom of Information Act appeal finally revealed a dispute between vendors was the cause of the shutdown. Through it all, the Lottery Commission said nothing. One of the advantages for bettors in legalized sports betting is the knowledge that a regulatory body exists to resolve all disputes fairly. However, this level of confidence doesn’t shine through in the Mountaineer State.
New Mexico: Lack of Any Regulations or Laws
New Mexico entered into the legal sports betting realm via the back door. The wording of the state’s compact with tribal casinos permitted the tribes to offer any Class III game, and sports betting is classified as Class III. First to market was the Santa Ana Star north of Albuquerque. Other tribal casinos have joined in and more will follow in time. Since it’s tribal-run, there are no specific sports betting regulations managed by the state. While there’s a very small New Mexico Gaming Control Board that oversees compliance by tribal casinos, it’s unclear how hands-on it is when it comes to sports betting. Dispute resolutions are the province of the tribes.
Rhode Island: Followed the Delaware Model
Rhode Island decided to copy the approach of a similarly diminutively sized state in Delaware, settling on a single-vendor approach. However, like Delaware, it has resulted in stagnant innovation. Rhode Island has also had the unfortunate luck of having two of its local teams reach the championship round of their respective sports in the state’s first year of accepting wagers. The Patriots and the Bruins both received a large amount of local backing and it decreased profits significantly for the state. Rhode Island recognized its lack of innovation, though, and pushed through a new law that permits mobile betting in the state. It’s unlikely, however, that it will have that product up and running before sometime this fall.
Pennsylvania: One Skin in the Game
While much has been made of Pennsylvania’s high tax rate for operators (36%) and high licensing fee ($10 million), the biggest mistake may have been limiting the online sports books to only one skin per physical casino. Moreover, that online skin must have the same brand as the physical casino it’s associated with. In the new market for sports wagering, casino operators are increasingly not sports book operators. By limiting the number of online operators and their branding, it’s giving consumers fewer options. This limit, combined with those aforementioned high barriers to entry, make Pennsylvania far less likely to be the originator of anything innovative in sports wagering, as only the big boys will have the money and influence to buy into the Pennsylvania market.
The above list represents the eight states which are currently able to take legal sports wagers. So what about the other nine states (and one district) that have passed sports betting laws, but haven’t yet opened for business? Did any of them get it right? I’ll look into that in Part Two of this post. In the meantime, if you think there’s a more egregious flaw than what I’ve listed, leave a comment below and we’ll discuss.
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Totally agree on the Rhode Island front. Also, the actual sportsbook itself in Twin River is extremely underwhelming. The odds screens are way too small. Punters must effectively stand in line in order to see the odds board. Smells like a recently cleaned bathroom. Sad bad. Bright lights. Terrible experience overall. Combine that with the crap odds offered, I didn’t place a single bet there in my two visits to the casino. Apparently they have recently added kiosk betting, but with the odds still tied to Will Hill, it’s a joke.
Sad *bar.
In Nevada you do have to open a mobile account in person at the casino . .
But, All the major books allow deposits & withdrawals on your phone app once established . .
larry k
Looks like Indiana is going to allow the books to limit winning players. I have heard many complaints out of NJ about fan dual & dratkings not even allowing players standard $100 bets! Will all the states have this clause?
Almost every sports book does this to some degree. They’ll typically cut limits down to almost nothing, or simply refuse a wager. I don’t expect that this will change in any of the new jurisdictions.
I don’t disagree with your perspective on Delaware right up until the end. With a total population under 1 million and a legal requirement for betting to occur within the borders of the state how can anyone possibly expect the revenue to trend upwards significantly. Compare that with 8.9 million in NJ…. The current legal landscape will not allow a state like Delaware to compete or grow.
That is the catch with mobile betting. CG started it all here by demanding that virtually all players betting three figures do so via a mobile means. That included those who were physically present in the book! That has eased
up a little but the objective was to be able to control the player. Window betting allows the player to stay in action
at places like William Hill and Draft Kings.
Good summer update article.
Larry mentioned being able to withdraw on the apps in NV.
Other than WH I was not aware of that. What books let you withdraw remotely?
Delaware has a lot of people who work in cities like Wilmington or Newark but don’t live in the state. Having mobile betting would greatly improve Delaware’s revenue. If they had just one competing book, you could bet that William Hill would find a way to put out a mobile product.