Arizona small businesses have waited 20 years for gaming to move off the state’s tribal reservations. They looked forward to getting in on the action when sports betting legislation first went before lawmakers in 2019.
Now those business owners say they’re still being left out of what could be a multimillion-dollar new industry.
As always in the sausage-making process of writing laws, it seems some interests get rich, some get by, and some get bypassed.
Under a bill promoted by Governor Doug Ducey, a total of 20 sports betting licenses would be allocated in the state: half to tribes, and half to professional sports franchises. Arizona’s four major professional sports teams would be able to operate sports betting at their venues, at separate retail locations within a quarter mile of the stadiums/arenas, and also online. The remaining licenses would be awarded to sports entities like the PGA Tour and NASCAR.
Arizona tavern owner David Delos says in this case, owners of small bars and taverns, where sports fans gather to cheer on their teams, are the losers.
“We were pretty excited (about the legislation) until about a month ago, when we found out we missed out on any opportunities,” said Delos. He is president of the Arizona Licensed Beverage Association (ALBA), whose members hoped for the right to bid on those licenses.
“There are a lot of moving parts, and many are restrained by compacts,” Delos told GGB News, “but we felt it would be a win-win—the more money we made, the more the state would make.” Delos likes the idea of tracking sports wagers with geofencing apps, so if someone places a bet in a bar, the bar owner gets a percentage of the fee.
ALBA was established in 1936, shortly after the end of Prohibition. Its mission is to “protect retail liquor licenses against unfair legislation.” The group currently represents 500 businesses in the Grand Canyon State, and has a full-time lobbyist, Don Isaacson. He had his work cut out for him in the twisty maze of Arizona’s legislative session, as lawmakers hammered out the bill to expand gaming.
Winning Tribal Support
Ducey submitted his bill after months of negotiating with gaming tribes, which have historically opposed offering sports betting to actual sports teams. In exchange for the tribes’ support, Ducey negotiated amendments to gaming compacts that would give tribes the right to offer new table games and also open an unspecified number of new casinos, including off-reservation gaming halls in the Phoenix metro area.
Two tribal chiefs have publicly supported the bill, and Governor Stephen Lewis of the Gila River Indian Community, which has three casinos, has confirmed that 18 tribes have agreed to the new compact.
“I can say that for my fellow tribal leaders who are at the table, too, we’re happy with the final product, Lewis told the Senate Commerce Committee last month.
Others aren’t so happy. Critics say it’s unfair to give sports teams the right to offer sportsbooks while cutting out small businesses; some say the franchises are Ducey’s political allies. Another major irritant: Ducey isn’t sharing the details of his deal with the tribes, which also have agreed to keep mum under a non-disclosure agreement.
Republican Senator Michelle Urgenti-Rita (l.) of Scottsdale spoke for small business operators when she asked, “Why not (include) a restaurant that wants to take a stab at competing with a license? I’m failing to understand the necessity of the sports team.”
As for sports franchises taking bets on their own games, she said, “It reeks of a conflict of interest.” Her colleague, Senator Tyler Pace agreed. During hearings on the measure, he said, “So I’m playing the game, but I’m also the house for the bet?”
Ducey attorney Anni Foster replied, “That’s sort of correct,” but argued that the teams have the financial backing and experience to operate a “low-margin business.” At the same hearing, ALBA lobbyist Isaacson pleaded for a place in the sun: “Our establishments look for an opportunity to compete as well.”
Sports-betting license holders could contract with online wagering companies such as FanDuel, DraftKings and BetMGM, which naturally back the measure.
‘We Agree, But…’
“We agree with what the governor is trying to do,” Delos told GGB News. “Our disappointment is that there are no opportunities for small business people. We would like to be part of the discussion, and we haven’t been at this point.”
On February 23 a friendly lawmaker, Senator David Gowan, added the provision of keno for business operations at least five miles from Indian casinos, including fraternal or veterans’ organizations, racetracks, off-track betting facilities and newly added by Gowan, “establishments holding a Class 6 liquor license.”
One proposal that’s counterproductive, Delos feels, prohibits keno and digital lottery games “within five miles of a gambling business.”
“In Scottsdale, you have the Talking Stick casino. So ‘within five miles’ of that would take all of Scottsdale out,” he said. “There are some real fairness issues. This bill creates winners and losers, and it seems like small business is the loser.”
Senate Bill 1797 was approved by the committee by a vote of 6-3, but not without ominous rumblings from some senators that they might not be so agreeable on the next go-round. A similar vetting process for a similar bill is happening in the House.
As Delos pointed out, “Covid has destroyed our industry or at least put a dent in it, and we were hoping for a lifeline. We’re open, but we’re open with huge debts, leases we have to pay—those fees haven’t been waived.”
Meanwhile, “Governor Ducey has signed away our right for sportsbooks of any kind. My businesses won’t benefit from it, except my customer would be interested in watching the game in my establishment. We’re written out of that entirely now.”
With the inclusion of keno in the bill, Delos feels his fellow small businesses have a fighting chance. “I think there will be a lot of push and pressing in the next week or two.”
While Fox 10 Phoenix questioned the measure’s “transparency problems” and a columnist in the Austin American-Statesman called it “a massive giveaway to Arizona’s pro sports leagues.” But last week, HB 2772 sailed through its third reading in the state’s House of Representatives, approved by lawmakers 48-12.
