{"id":77892,"date":"2018-09-30T01:17:09","date_gmt":"2018-09-30T08:17:09","guid":{"rendered":"https:\/\/www.lasvegasadvisor.com\/gambling-with-an-edge\/?p=77892"},"modified":"2018-09-30T10:03:14","modified_gmt":"2018-09-30T17:03:14","slug":"beware-of-the-lottery","status":"publish","type":"post","link":"https:\/\/www.lasvegasadvisor.com\/gambling-with-an-edge\/beware-of-the-lottery\/","title":{"rendered":"Beware the Lottery"},"content":{"rendered":"

Before the great casino proliferation of the last 20 years, the state lottery was sometimes the only game in town. Lotteries, with their high hold percentages, have long been cash cows for many states. Now with other forms of gambling saturated into many state economies,\u00a0lotteries have started to experience dwindling patronage. In some states, the state-run lottery commission works separately from the state gaming commission. However, in other states the lottery commission may still be the sole regulatory body overseeing gambling.<\/p>\n

 <\/p>\n

The Fight for Sports Wagering<\/h5>\n

Enter sports wagering. A new form of gambling entertainment is duly seen as a new form of tax revenue for cash-strapped states. It\u2019s also seen as a lifeline for sinking lottery sales. Make no mistake, there are many states who are facing an internal power struggle as they move toward legalization. On one side, casino interests and entrepreneurs are trying to secure a regulated but accessible market. On the other side, lotteries would like to keep sports wagering as their own product. We\u2019ve seen how sports wagering as a regulated, but accessible, market works in Nevada and now in New Jersey and Mississippi. There are two models for how this works with the lottery driving the bus.<\/p>\n

 <\/p>\n

The Delaware Model<\/h5>\n

Since 2009, Delaware has offered parlay card wagering on the NFL through the state lottery. The product was wildly successful being the only legal sports betting in the US outside of Nevada. Parlay cards delivered impressive hold percentages for the lottery. Between 30 and 50 cents of every dollar wagered was retained as gross profit. Of that profit, 40.2% went to the casino, 9.8% went to increasing purses on horse racing in the state, and 12.5% was split between their two vendors, Scientific Games for the equipment and William Hill for the risk management. The remaining 37.5% was kept by the state as revenue.<\/p>\n

What\u2019s clearly missing from this model is variety. Players had one choice and one choice only. If they didn\u2019t like the lines on the cards that week, or if they were profiled as a sharp bettor for targeting stale lines, they were out of luck. A lack of competition in a state is naturally bad for the players. It also stifles innovative growth. The hosting casinos don\u2019t put much investment into their sports betting areas. They\u2019d prefer to let them be outgrowths of the existing race book.<\/p>\n

Delaware could have legally offered some sort of mobile betting within the state years ago. However, with its\u00a0technology partners making so little from the effort, it still hasn\u2019t developed. I suspect William Hill took the job for a mere 6.25% split in order to get its\u00a0foot in the door. A proof of concept if you will. Now Delaware has the full complement of single-game wagering, but lacks diversity in the offering. The Delaware Model is bad for the player, bad for innovation, and bad for future competition with neighboring states for the sports wagering dollar.<\/p>\n

 <\/p>\n

The West Virginia Model<\/h5>\n

West Virginia was ahead of the curve when it came to sports wagering legalization. It\u00a0was ready to get in the game pending PASPA being overturned. It\u00a0also put sports wagering in the hands of the West Virginia Lottery Commission. However, that regulatory body opted to let the state\u2019s casinos choose who it\u00a0wanted to partner with. Additionally, West Virginia chose a very moderate 10% tax rate. It\u00a0also made provisions for mobile betting. Of course, when the sitting governor owns the state\u2019s only stand-alone casino, there might be some influence in your decision-making.<\/p>\n

With only four racinos and one casino in the state, competition is limited, which is a negative for the consumer. However, the hands-off approach is similar to other states that\u00a0have gaming commissions. As a result, West Virginia has functioning sports wagering with the promise of mobile wagering on the way. A step forward for the player. All is not roses in West Virginia, however. There’s been some abrupt turnover at the lottery commission. There’s also been some increased scrutiny of\u00a0a few steps the governor has taken in shaping policy relating to his own business interests. The lottery commission has come under fire from concerned legislators. West Virginia and Delaware are similar in size and population. It’ll be interesting to compare the revenue numbers between the two in a few months.<\/p>\n

 <\/p>\n

William Hill and IGT Join Forces to Target This Market<\/h5>\n

Early in July, Rhode Island passed a law giving the state\u2019s lottery the authority to offer sports wagering at the state\u2019s two casinos. In doing so, it\u00a0distinctly followed the Delaware model. The state will retain 51% of the gross profit. IGT was the lone\u00a0bidder to be the equipment vendor and its\u00a0share would be 32%. The host casino gets the remaining 17%. IGT subsequently announced that William Hill would provide risk management.<\/p>\n

Since then, William Hill and IGT have formed a multi-year partnership to target more states using the Delaware model. They\u2019re offering a fully managed solution that\u00a0covers both the front-end software and the back-end management. William Hill will do its\u00a0part via risk management of daily operations. It\u00a0can pitch this solution to states and enable them to take a huge cut as tax revenue.<\/p>\n

Unfortunately for the player, this solution makes a lot of sense for some states. It enables them\u00a0to wash their hands of the complicated process of regulating a competitive sports wagering marketplace. It gives them a single point of contact. The lack of competition enables them to set extremely high tax rates. With only one vendor there are no complaints from the industry. We\u2019re going to see this solution pop up in a number of other states. The final and most-telling reason why state lottery commissions will embrace this turnkey solution is because they are extremely risk averse. Lotteries don\u2019t lose. Offering a sports wagering solution with the most\u00a0padding against variance is very appealing to them.<\/p>\n

 <\/p>\n

Which\u00a0States Are At Risk?<\/h5>\n

If your state has a lottery commission, but not a gaming commission, you are probably headed down this path if sports wagering is legalized. If your state doesn\u2019t have large-scale casinos, but there’s discussion of legalizing sports wagering in the state, this will\u00a0likely be the result. Some of the states most at risk, in my opinion: Georgia, Maine, New Hampshire, Oregon, Texas,<\/strong> and Vermont<\/strong>. If you’d like to have the freedom to wager on sports in your state in a competitive marketplace, you should strongly consider contacting your state representative or lottery commission board. Let them know that competition breeds innovation. Help them understand that gambling entertainment works best for everyone when low-margins and high-volume are\u00a0the objectives. Encourage them to resist the urge for the simple solution and focus on one\u00a0that can\u00a0grow an industry in your state.<\/p>\n

As always, we continue to update our\u00a0interactive map<\/a> to help you keep up with developments in your state or neighboring states.<\/p>\n\"Facebook\"<\/a>\"twitter\"<\/a>\"youtube\"<\/a>\"instagram\"<\/a>","protected":false},"excerpt":{"rendered":"

Before the great casino proliferation of the last 20 years, the state lottery was sometimes the only game in town. Lotteries, with their high hold percentages, have long been cash cows for many states. Now with other forms of gambling saturated into many state economies,\u00a0lotteries have started to experience dwindling patronage. In some states, the […]<\/p>\n","protected":false},"author":26,"featured_media":63070,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_exactmetrics_skip_tracking":false,"_exactmetrics_sitenote_active":false,"_exactmetrics_sitenote_note":"","_exactmetrics_sitenote_category":0,"spay_email":"","jetpack_publicize_message":"","jetpack_is_tweetstorm":false},"categories":[19],"tags":[522,728,1868,632,1867,1869,1870,1871,1874,1804,174,1872,1873,1802,850],"yoast_head":"\nBeware the Lottery - Gambling With An Edge<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.lasvegasadvisor.com\/gambling-with-an-edge\/beware-of-the-lottery\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Beware the Lottery - Gambling With An Edge\" \/>\n<meta property=\"og:description\" content=\"Before the great casino proliferation of the last 20 years, the state lottery was sometimes the only game in town. 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