Let’s look at the effect of the SCOTUS decision on sports bettors in states where betting is legalized now or soon to be. To do this, I’ll need to address two separate categories, professional and casual bettors.
For those who want to bet on sports primarily for entertainment, the spread of legal books gives them a way to bet locally and legally. Those who have been reluctant to bet with agents for offshore books, or to post-up (seed an account with funds) to bet, now have an outlet. With the push for betting phone apps in some legal states, players won’t even have to travel to a physical book.
While some might protest that this will create a new class of addicted gamblers, my opinion is that most people with those tendencies would have already found a sports book agent or some other form of gambling to feed their addition. Most problem sports bettors use agents because they’re allowed to bet on credit. That won’t be an option in legal books.
Many who want to have action on games but didn’t have an outlet had turned to Daily Fantasy Sports (DFS). Legal books are a threat to DFS, and vice versa, which is one reason why the DFS companies are now getting involved in the legal sports book arena.
Overall, I think legalization is good for the recreational bettor who just wants to bet for entertainment and doesn’t really care about many of the things that pros are concerned with.
As for professional bettors, I don’t know any who think legalization is a good prospect for them. The specter of vig increasing to -115 or higher is a major concern, as it would eliminate almost all pros from a path to profit in legal books. It’s not a big deal at present, because most pros do the majority of their wagering offshore. If the offshore industry isn’t shut down, legalization won’t affect much and may provide opportunities to supplement income by finding value in the legal books. But, I doubt there will be enough advantageous spots in the legal books to provide an acceptable return if access to offshore books is restricted.
The pros do business with offshore books for many reasons. For example, offshore books generally have more betting options, offer higher limits, and deal on credit. If the offshore option for U.S.-based pros is shut down by the government, serious pros would have to relocate their operations to locales where they could access offshore books. Or give it up entirely. Beating sports books requires a major effort and pros on the verge of retirement might just throw in the towel rather than make the major moves necessary to stay in business.
Another issue I’m curious about is whether legal books will be able to bar winning bettors, as they do in Vegas. New Jersey casinos split from the Vegas policy by not allowing casinos to bar card counters (although they do allow them to employ countermeasures that have close to the same effect). I guess books could limit wagers on apps for winning players, although that would depend on how the laws were written, assuming it was even addressed.
The sports betting industry mirrors online poker in a lot of ways. At the height of the poker boom, while the unregulated online poker rooms had their share of problems, most players would agree that it was the high-water mark for poker (both live and online) for a generation. The U.S. government was mostly successful in shutting it down, and now the online rooms in legal states are struggling to attract a player base that’s anywhere near that of the world-wide player pools before the shutdown.
Similarly, despite the problems inherent in dealing with unregulated offshore books, if access to those books is shut off to American players who now enjoy the benefits of betting offshore, they’ll likely look back to pre-legalization as the halcyon days of sports betting in the U.S. There’s simply no chance that U.S. books will be able to offer the betting limits and relatively low vig, not to mention the extension of credit, that exists for serious bettors in the offshore books now.
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Why WOULDN’T the legal US books be able to match or even better the features of the offshore books? No one’s going to tell them what lines they have to post or what vig will be on those lines.
The legalization presents a fantastic opportunity, in fact, for someone to step in and absolutely blow away offshore, Vegas, and backstreet bookie competition. All they have to do is deal nickel lines. The limits don’t matter to 99% of bettors anyway–they’ll never be betting ten grand on a game. Also, a US legal book would have a fantastic inherent advantage over the offshore books. With a non-US gambling entity, you never know if the company is going to vanish like a fart on the wind, taking your money with it. You have NO legal recourse when that happens, unless you want to take a charter flight down to the Sand Crab Republic and have a heart-to-heart talk with the Big Mango himself. The US books should play up the safety of being located in a jurisdiction where there is rule of law.
The point is that sports books operate on a pretty thin margin as it is, and with the specter of high taxes, payoffs to leagues and other expenses the books will struggle to hold the line at -110. I don’t see how they can do it. To go to -105 would be impossible. DraftKings is already at -115.
I’m going to take the counterpoint here. I think we’re entering the Golden Age of Sports Betting. For the next 3 to 5 years there is likely to be no “Federal Framework” and it is purely up to the states to legislate and regulate. Yes, some states like Pennsylvania won’t be able to see the forest for the trees and will over-tax and limit competition. However, plenty of other states will create environments that foster a competitive market.
In those competitive states a low-margin/high-volume business model is profitable. I don’t expect all sports book operators to be forward-thinking enough to realize that, but all we need is a handful. Another profitable business model in a high-volume environment is promotional pricing to build brand loyalty. Fortunately, casinos utilize this approach daily. AP’s thrive on promotions. We’ll see plenty of sports betting promos.
Even if we do end up with a lot of -115 pricing, the pros will adapt. Finding market inefficiency is how pros have made their money for years. Going back 10-20 years, I don’t know of any sports betting professional who still beats the same market in the same way. You either adapt or die. 6:5 Blackjack wasn’t the end of professional blackjack play. The disappearance of Stud games didn’t kill off the poker pro. You work hard and hone new skills.
For casual bettors I can see where the things you discuss are feasible. Once everybody calms down and realizes that this isn’t a gigantic windfall with mountains of money up for grabs , hopefully lawmakers and the leagues will understand how this will be great for them without getting greedy, as has been the case in Nevada.
As for serious bettors (those betting 20k+ on games), -115 would be a killer. However, those that serious would find a way to access offshore books as they do now.
If you offer a dime line with X total betting handle, or if you offer a nickel line with 2X total betting handle, aren’t you making the same amount of money? it’s like the gas station that is willing to make 4 cents a gallon instead of 8–it just pumps twice as much.
There should be very little additional marginal cost to handling more action, given how sports betting works. And yes, obviously, you couldn’t be WalSportsMart in a jurisdiction where the taxes are ridiculous, but there will be plenty of states where the taxes are low.
Many discount grocery stores, auto parts stores, clothing stores, etc. accept lower gross profit margins than their competitors, and that is a major aspect of their business model. I do not see any inherent reason why a sports book could not do the same. As far a low margins go, well, the average grocery store makes 2% margin; yet, there are such things as discount grocers.
There is also the concept of loss leader. I’m sure many casinos, even in low-margin states, would benefit from the extra customer volume that, of course, would spill over to other games and restaurants. Again, I reference Sugarhouse in Philadelphia. The only casino in a city with a football team that has a rabid fan base AND just won its first Super Bowl. Plus, its baseball team has a chance to make the playoffs and its NBA team just came off a playoff season. How could they not think that having a sports book is a good idea? With each decision its management makes, Sugarhouse proves what a small-potatoes mentality they have. No guts, no glory.
Captain Jack speculates that we could be entering a “Golden Age” of Sports Betting. The last Golden Age was 1999-2004 in the online world. Competition was fierce, with hundreds of operators setting up shop offshore. Many operators had only a vague notion of how to properly run a sports book. As such, line-making mistakes were made. Lots of mistakes, in fact, which resulted in an abundance of low hanging fruit for sharp bettors to devour.
At the end of this five-year run, there was a great deal of consolidation, and books which survived got much better. There was still fruit in the trees, but it wasn’t nearly as accessible, and AP’s had to work much harder This is how conditions remain today, with a challenging environment and pretty much only five or so reliable sports books accessible to US players.
One can only hope that legalization in states around the country will produce a similar “Wild West” environment that we experienced 20 years ago offshore.